Adjustment of an Affine Contract with Fixed-point Iteration
نویسندگان
چکیده
We study a principal-agent game where the principal commits to an affine contract. We suppose that the principal has incomplete information but he can adjust the contract according to the myopically behaving agent’s reactions when the game is played repeatedly. The adjustment process can be considered as a learning model. We derive convergence conditions for fixed-point iteration as an adjustment scheme and study a related continuous time process. The analysis is based on parameterizing the problem such that we obtain a degree zero homogeneous system of equations, where the nonlinear mapping satisfies Walras’
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