Barlo, Mehmet and Ozdogan, Ayca (2011): Optimality of linearity with collusion and renegotiation.

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Abstract
This study analyzes a continuoustime Nagent Brownian hiddenaction model with exponential utilities, in which agents' actions jointly determine the mean and the variance of the outcome process. In order to give a theoretical justi¯cation for the use of linear contracts, as in Holmstrom and Milgrom (1987), we consider a variant of its generalization given by Sung (1995), into which collusion and renegotiation possibilities among agents are incorporated. In this model, we prove that there exists a linear and stationary optimal compensation scheme which is also immune to collusion and renegotiation.
Item Type:  MPRA Paper 

Original Title:  Optimality of linearity with collusion and renegotiation 
Language:  English 
Keywords:  Principalagent problems; moral hazard; linear contracts; continuoustime model; Brownian motion martingale method; collusion,; renegotiation; team 
Subjects:  D  Microeconomics > D8  Information, Knowledge, and Uncertainty > D86  Economics of Contract: Theory D  Microeconomics > D8  Information, Knowledge, and Uncertainty > D82  Asymmetric and Private Information ; Mechanism Design C  Mathematical and Quantitative Methods > C6  Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C61  Optimization Techniques ; Programming Models ; Dynamic Analysis C  Mathematical and Quantitative Methods > C7  Game Theory and Bargaining Theory > C73  Stochastic and Dynamic Games ; Evolutionary Games ; Repeated Games 
Item ID:  35548 
Depositing User:  Mehmet Barlo 
Date Deposited:  23 Dec 2011 16:06 
Last Modified:  02 Oct 2019 05:44 
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URI:  https://mpra.ub.unimuenchen.de/id/eprint/35548 