A Solvable Time-Inconsistent Principal-Agent Problem
We consider the dynamic contract model with time inconsistency preference of principal-agent problem to study the influence of the time inconsistency preference on the optimal effort and the optimal reward mechanism. We show that when both the principal and the agent are time-consistent, the optimal...
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| Format: | Article |
| Language: | English |
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Wiley
2018-01-01
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| Series: | Discrete Dynamics in Nature and Society |
| Online Access: | http://dx.doi.org/10.1155/2018/8512608 |
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| _version_ | 1832556488146550784 |
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| author | Chao Li Zhijian Qiu |
| author_facet | Chao Li Zhijian Qiu |
| author_sort | Chao Li |
| collection | DOAJ |
| description | We consider the dynamic contract model with time inconsistency preference of principal-agent problem to study the influence of the time inconsistency preference on the optimal effort and the optimal reward mechanism. We show that when both the principal and the agent are time-consistent, the optimal effort and the optimal reward are the decreasing functions of the uncertain factor. And when the agent is time-inconsistent, the impatience of the agent has a negative impact on the optimal contract. The higher the discount rate of the agent is, the lower the efforts provided; agents tend to the timely enjoyment. In addition, when both the principal and the agent are time-inconsistent, in a special case, their impatience can offset the impact of uncertainty factor on the optimal contract, but, in turn, their impatience will affect the contract. |
| format | Article |
| id | doaj-art-a0953a00e26b483a888601ff46ab52f1 |
| institution | Kabale University |
| issn | 1026-0226 1607-887X |
| language | English |
| publishDate | 2018-01-01 |
| publisher | Wiley |
| record_format | Article |
| series | Discrete Dynamics in Nature and Society |
| spelling | doaj-art-a0953a00e26b483a888601ff46ab52f12025-02-03T05:45:15ZengWileyDiscrete Dynamics in Nature and Society1026-02261607-887X2018-01-01201810.1155/2018/85126088512608A Solvable Time-Inconsistent Principal-Agent ProblemChao Li0Zhijian Qiu1School of Economic Mathematics, Southwestern University of Finance and Economics, Chengdu, ChinaSchool of Economic Mathematics, Southwestern University of Finance and Economics, Chengdu, ChinaWe consider the dynamic contract model with time inconsistency preference of principal-agent problem to study the influence of the time inconsistency preference on the optimal effort and the optimal reward mechanism. We show that when both the principal and the agent are time-consistent, the optimal effort and the optimal reward are the decreasing functions of the uncertain factor. And when the agent is time-inconsistent, the impatience of the agent has a negative impact on the optimal contract. The higher the discount rate of the agent is, the lower the efforts provided; agents tend to the timely enjoyment. In addition, when both the principal and the agent are time-inconsistent, in a special case, their impatience can offset the impact of uncertainty factor on the optimal contract, but, in turn, their impatience will affect the contract.http://dx.doi.org/10.1155/2018/8512608 |
| spellingShingle | Chao Li Zhijian Qiu A Solvable Time-Inconsistent Principal-Agent Problem Discrete Dynamics in Nature and Society |
| title | A Solvable Time-Inconsistent Principal-Agent Problem |
| title_full | A Solvable Time-Inconsistent Principal-Agent Problem |
| title_fullStr | A Solvable Time-Inconsistent Principal-Agent Problem |
| title_full_unstemmed | A Solvable Time-Inconsistent Principal-Agent Problem |
| title_short | A Solvable Time-Inconsistent Principal-Agent Problem |
| title_sort | solvable time inconsistent principal agent problem |
| url | http://dx.doi.org/10.1155/2018/8512608 |
| work_keys_str_mv | AT chaoli asolvabletimeinconsistentprincipalagentproblem AT zhijianqiu asolvabletimeinconsistentprincipalagentproblem AT chaoli solvabletimeinconsistentprincipalagentproblem AT zhijianqiu solvabletimeinconsistentprincipalagentproblem |