Seminario académico de Finanzas y Contabilidad

Fecha: 07 de noviembre, 13:00 horas,sala P 302, Facultad de Economía y Negocios

Título: Aggregation and Convexity in the Provision of Dynamic Incentives

Expositor: Thomas Hemmer, Rice University

In this paper, I identify an alternative preference structure that preserves most of the cherished simplicity of the formulation of the Principal-Agent problem pioneered by Holmstrm and Milgrom (1987). The main advantage of my approach is in relation to the structure of the optimal contract: it adds a convex component to their optimal linear contract. This provides new opportunities to revisit empirical predictions and studies based o⁄ of their linear formulation and to demonstrate how the empirical irregularities may be at least partially explained by this one additional component identied here.