IDEAS home Printed from https://ideas.repec.org/h/spr/sprchp/978-981-99-5487-2_5.html
   My bibliography  Save this book chapter

Contracting in Continuous Time: Time-Multiplicative Preferences

In: Contract Theory: Discrete- and Continuous-Time Models

Author

Listed:
  • Jaeyoung Sung

    (Ajou University)

Abstract

We study a generalized version of the classical Holmström-Milgrom (1987) continuous-time model which helps overcome main limitations of discrete-time models. We state the general model in strong formulation with the (production) outcome driven by a drift-controlled Brownian Motion. The strong formulation helps us understand, hopefully intuitively, the general structures and issues of the first-best and second-best problems. We study the implementability theorem which justifies the use of the first-order approach to the second-best continuous-time model, and then apply the well-known dynamic programming method to obtain closed-form solutions to the two interesting cases: namely, a stationary case, and a linear-quadratic case. The former and the latter cases help characterize, respectively, static and dynamic aspects of optimal contracts.

Suggested Citation

  • Jaeyoung Sung, 2023. "Contracting in Continuous Time: Time-Multiplicative Preferences," Springer Books, in: Contract Theory: Discrete- and Continuous-Time Models, chapter 0, pages 65-98, Springer.
    • Handle: RePEc:spr:sprchp:978-981-99-5487-2_5
    DOI: 10.1007/978-981-99-5487-2_5
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:sprchp:978-981-99-5487-2_5. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.