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Principal-agent problem with multiple principals

Hu, Kaitong; Ren, Zhenjie; Yang, Junjian (2019), Principal-agent problem with multiple principals. https://basepub.dauphine.fr/handle/123456789/19491

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Type
Document de travail / Working paper
External document link
https://hal.archives-ouvertes.fr/hal-02088486
Date
2019
Series title
Cahier de recherche CEREMADE, Université Paris-Dauphine
Published in
Paris
Pages
18
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Author(s)
Hu, Kaitong
Centre de Mathématiques Appliquées - Ecole Polytechnique [CMAP]
Ren, Zhenjie
CEntre de REcherches en MAthématiques de la DEcision [CEREMADE]
Yang, Junjian
Fakultät für Mathematik und Geoinformation [Wien] [TU Wien]
Abstract (EN)
We consider a moral hazard problem with multiple principals in a continuous-time model. The agent can only work exclusively for one principal at a given time, so faces an optimal switching problem. Using a randomized formulation, we manage to represent the agent's value function and his optimal effort by an Itô process. This representation further helps to solve the principals' problem in case we have infinite number of principals in the sense of mean field game. Finally the mean field formulation is justified by an argument of propagation of chaos.
Subjects / Keywords
Moral hazard; contract theory; backward SDE; optimal switching; mean field games; propagation of chaos