Discussion Papers 2021
CIRJE-F-1182 | "Principal-Agent Problems with Hidden Savings in Continuous Time" |
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Author Name | Nakajima, Tomoyuki |
Date | December 2021 |
Full Paper | PDF file |
Remarks | Revised in April 2023. |
Abstract |
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In this paper, we consider a continuous-time principal-agent problem with hidden savings. The agent’s problem, which is non-Markovian, is formulated using the stochastic HJB equation. Without loss of generality, attention is restricted to those contracts for which the agent optimally chooses zero savings. Then, the principal’s problem can be expressed as maximizing her expected profit subject to two SDEs: one equation describing |
Keywords: moral hazard; hidden savings; continuous time; weak formulation; first-order approach; stochastic HJB equations |