Calibrated Incentive Contracts

Sylvain Chassang

    Research output: Contribution to journalArticle

    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 incentive properties of 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.

    Original languageEnglish (US)
    Pages (from-to)1935-1971
    Number of pages37
    JournalEconometrica
    Volume81
    Issue number5
    DOIs
    StatePublished - 2013

    Fingerprint

    Incentive contracts
    Limited liability
    Benchmark
    Moral hazard
    Dynamic contracts
    Incentives
    Agency problems
    Adverse selection
    Contracting

    Keywords

    • Approachability
    • Detail-free contracts
    • Dynamic contracts
    • High-watermark contracts
    • Robust contracts

    ASJC Scopus subject areas

    • Economics and Econometrics

    Cite this

    Calibrated Incentive Contracts. / Chassang, Sylvain.

    In: Econometrica, Vol. 81, No. 5, 2013, p. 1935-1971.

    Research output: Contribution to journalArticle

    Chassang, S 2013, 'Calibrated Incentive Contracts', Econometrica, vol. 81, no. 5, pp. 1935-1971. https://doi.org/10.3982/ECTA9987
    Chassang, Sylvain. / Calibrated Incentive Contracts. In: Econometrica. 2013 ; Vol. 81, No. 5. pp. 1935-1971.
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