Discrete-Time Approximations of the Holmström-Milgrom Brownian-Motion Model of Intertemporal Incentive Provision

نویسندگان

  • Martin F. Hellwig
  • Klaus M. Schmidt
  • Holger Müller
  • Jae Sung
چکیده

This paper studies the relation between discrete-time and continuoustime principal-agent models. We derive the continuous-time model as a limit of discretetime models with ever shorter periods and show that optimal incentive schemes in the discrete-time models approximate the optimal incentive scheme in the continuous model, which is linear in accounts. Under the additional assumption that the principal observes only cumulative total profits at the end and the agent can destroy profits unnoticed, an incentive scheme that is linear in total profits is shown to be approximately optimal in the discrete-time model when the length of the period is small.

برای دانلود متن کامل این مقاله و بیش از 32 میلیون مقاله دیگر ابتدا ثبت نام کنید

ثبت نام

اگر عضو سایت هستید لطفا وارد حساب کاربری خود شوید

منابع مشابه

A wavelet method for stochastic Volterra integral equations and its application to general stock model

In this article,we present a wavelet method for solving stochastic Volterra integral equations based on Haar wavelets. First, we approximate all functions involved in the problem by Haar Wavelets then, by substituting the obtained approximations in the problem, using the It^{o} integral formula and collocation points then, the main problem changes into a system of linear or nonlinear equation w...

متن کامل

Asymptotic Efficiency in Dynamic Principal-Agent Problems

In a seminal paper, B. R. Holmstro m and P. R. Milgrom (1987, Econometrica 55, 303 328) examine a principal-agent model in which the agent continuously controls the drift rate of a Brownian motion. Given a stationary environment, they show that the optimal sharing rule is a linear function of aggregated output. This paper considers a variant of the Brownian model in which control revisions take...

متن کامل

The Rate of Convergence of Euler Approximations for Solutions of Stochastic Differential Equations Driven by Fractional Brownian Motion

The paper focuses on discrete-type approximations of solutions to non-homogeneous stochastic differential equations (SDEs) involving fractional Brownian motion (fBm). We prove that the rate of convergence for Euler approximations of solutions of pathwise SDEs driven by fBm with Hurst index H > 1/2 can be estimated by O(δ) (δ is the diameter of partition). For discrete-time approximations of Sko...

متن کامل

Investigation of Brownian Motion of CuO-Water Nanofluid in a Porous Cavity with Internal Heat Generation by Using of LTNE Model

In this paper, the effect of the Brownian term in natural convection of CuO-Water nanofluid inside a partially filled porous cavity, with internal heat generation has been studied. It is assumed that the viscosity and thermal conductivity of nanofluid consists of a static part and a Brownian part of which is a function of temperature and the volume fraction of nanofluid. Because of internal hea...

متن کامل

Dispersion and Deposition of Micro Particles over Two Square Obstacles in a Channel via Hybrid Lattice Boltzmann Method and Discrete Phase model

Dispersion and deposition of aerosol particles over two square cylinders confined in a channel in laminar unsteady vortical flow were investigated numerically. Lattice Boltzmann method was used to calculate fluid characteristics and modify Euler method was employed as Lagrangian particle tracing procedure to obtain particle trajectories. Drag, Saffman lift, gravity, buoyancy and Brownian motion...

متن کامل

ذخیره در منابع من


  با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید

برای دانلود متن کامل این مقاله و بیش از 32 میلیون مقاله دیگر ابتدا ثبت نام کنید

ثبت نام

اگر عضو سایت هستید لطفا وارد حساب کاربری خود شوید

عنوان ژورنال:

دوره   شماره 

صفحات  -

تاریخ انتشار 1998