One Two
« August 2018 »
August
MoTuWeThFrSaSu
12345
6789101112
13141516171819
20212223242526
2728293031
 
You are here: Home Seminars 20.06. BGSE Micro Workshop: Marius Kulms

20.06. BGSE Micro Workshop: Marius Kulms

BGSE Micro Workshop with Marius Kulms (University of Bonn)

Event details
What
  • BGSE Workshop
When Jun 20, 2018
from 12:00 to 13:00
Where room 0.017
Contact Name Stephan Lauermann
Contact Email
Add event to calendar vCal
iCal

Topic

Optimal Contract Duration with Deteriorating Productivity

Abstract

I study optimal dynamic contracting between a revenue maximizing principal and an agent where allocations determine the duration of the contract. In the spirit of sequential screening, the agent is privately informed about his ability to generate future returns and about those returns. The type evolution for the agent features a novel characteristic, namely random changes of state unobservable to both the principal and the agent. I solve for the revenue maximizing contract in a model with two types. The optimal contract duration features temporal distortions: the ex ante less productive type is fired early compared to the first-best contract. Most notably, the optimal contract with symmetric information is myopic whereas the optimal contractwith private information is generally not, that is it may exhibit a positive time value.
My paper has implications on real-world contracts in franchising and similar businesses as it rationalizes contract duration as screening device.


 
 
 
filed under:
Document Actions