IDEAS home Printed from https://ideas.repec.org/p/xrs/sfbmaa/97-38.html
   My bibliography  Save this paper

The First-Best Sharing Rule in the Continuous-Time Principal-Agent Problem with Exponential Utility

Author

Listed:
  • Müller, Holger M.

    (Department of Economics, University of Mannheim)

Abstract

The continuous-time principal-agent model with exponential utility developed by Holmström and Milgrom (1987)admits a simple closed-form solution: The second-best sharing rule is a linear function of aggregated output. Here, we show that the first-best sharing rule is also linear in aggregated output. The result follows immediately from the separability of the problem and the fact that principal and agent both have CARA utility.

Suggested Citation

  • Müller, Holger M., 1997. "The First-Best Sharing Rule in the Continuous-Time Principal-Agent Problem with Exponential Utility," Sonderforschungsbereich 504 Publications 97-38, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
    • Handle: RePEc:xrs:sfbmaa:97-38
    Note: Financial support from the Deutsche Forschungsgemeinschaft, SFB 504, at the University of Mannheim, is gratefully acknowledged.
    as

    Download full text from publisher

    File URL: http://www.sfb504.uni-mannheim.de/publications/dp97-38.pdf
    Download Restriction: no
    ---><---

    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:xrs:sfbmaa:97-38. 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: Carsten Schmidt (email available below). General contact details of provider: https://edirc.repec.org/data/sfmande.html .

    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.