The first-best sharing rule in the continuous-time principal-agent problem with exponential utility

Müller, Holger M.

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URN: urn:nbn:de:bsz:180-madoc-28874
Document Type: Working paper
Year of publication: 1997
The title of a journal, publication series: None
Publication language: English
Institution: School of Law and Economics > Sonstige - Fakultät für Rechtswissenschaft und Volkswirtschaftslehre
MADOC publication series: Sonderforschungsbereich 504 > Rationalitätskonzepte, Entscheidungsverhalten und ökonomische Modellierung (Laufzeit 1997 - 2008)
Subject: 330 Economics
Subject headings (SWD): Agency-Theorie , Anreizsystem , Theorie
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.
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Das Dokument wird vom Publikationsserver der Universitätsbibliothek Mannheim bereitgestellt.

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