Title

Calibrated Incentive Contracts

Author(s)

Sylvain Chassang Sylvain Chassang (Princeton University)

Abstract

This paper studies a dynamic agency problem which includes limited liability, moral hazard and adverse selection. The paper develops a robust approach to dynamic contracting based on calibrating the payoffs that would have been delivered by simple benchmark contracts that are attractive but infeasible, due to limited liability constraints. The resulting dynamic contracts are detail-free and satisfy robust performance bounds independently of the underlying process for returns, which need not be i.i.d. or even ergodic.

Creation Date

2011-04

Section URL ID

ET

Paper Number

wp013_2011_Chassang.pdf

URL

http://detc.princeton.edu/wp-content/uploads/2016/11/wp013_2011_Chassang.pdf

File Function

Jel

C010, D020, H300

Keyword(s)

dynamic agency problem

Suppress

false

Series

10