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Dynamic programming approach to principal-agent problems

hal.structure.identifierDivision of the humanities and social sciences
dc.contributor.authorCvitanić, Jakša
hal.structure.identifierCEntre de REcherches en MAthématiques de la DEcision [CEREMADE]
dc.contributor.authorPossamaï, Dylan
hal.structure.identifierCentre de Mathématiques Appliquées - Ecole Polytechnique [CMAP]
dc.contributor.authorTouzi, Nizar
dc.date.accessioned2018-03-09T13:39:56Z
dc.date.available2018-03-09T13:39:56Z
dc.date.issued2018
dc.identifier.issn0949-2984
dc.identifier.urihttps://basepub.dauphine.fr/handle/123456789/17530
dc.language.isoenen
dc.subjectStochastic control of non-Markov systemsen
dc.subjectHamilton–Jacobi–Bellman equationsen
dc.subjectSecond order backward SDEsen
dc.subjectPrincipal–agent problemen
dc.subjectContract theoryen
dc.subject.ddc519en
dc.subject.classificationjelM.M5.M52en
dc.subject.classificationjelJ.J3.J33en
dc.subject.classificationjelD.D8.D82en
dc.subject.classificationjelC.C7.C73en
dc.subject.classificationjelC.C6.C61en
dc.titleDynamic programming approach to principal-agent problemsen
dc.typeArticle accepté pour publication ou publié
dc.description.abstractenWe consider a general formulation of the Principal-Agent problem with a lump-sum payment on a finite horizon, providing a systematic method for solving such problems. Our approach is the following: we first find the contract that is optimal among those for which the agent's value process allows a dynamic programming representation, for which the agent's optimal effort is straightforward to find. We then show that the optimization over the restricted family of contracts represents no loss of generality. As a consequence, we have reduced this non-zero sum stochastic differential game to a stochastic control problem which may be addressed by the standard tools of control theory. Our proofs rely on the backward stochastic differential equations approach to non-Markovian stochastic control, and more specifically, on the recent extensions to the second order case.en
dc.relation.isversionofjnlnameFinance and Stochastics
dc.relation.isversionofjnlvol22en
dc.relation.isversionofjnlissue1en
dc.relation.isversionofjnldate2018-01
dc.relation.isversionofjnlpages1–37en
dc.relation.isversionofdoi10.1007/s00780-017-0344-4en
dc.relation.isversionofjnlpublisherSpringeren
dc.subject.ddclabelProbabilités et mathématiques appliquéesen
dc.relation.forthcomingnonen
dc.relation.forthcomingprintnonen
dc.description.ssrncandidatenonen
dc.description.halcandidatenonen
dc.description.readershiprechercheen
dc.description.audienceInternationalen
dc.relation.Isversionofjnlpeerreviewedouien
dc.relation.Isversionofjnlpeerreviewedouien
dc.date.updated2018-03-09T13:35:39Z
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