Optimal Dynamic Contracting

2012 ◽  
Author(s):  
Marco Battaglini ◽  
Rohit Lamba
Keyword(s):  
Dynamic Contracting ◽  
Optimal Dynamic

scholarly journals Optimal dynamic contracting: The first‐order approach and beyond

2019 ◽  
Vol 14 (4) ◽  
pp. 1435-1482 ◽  
Author(s):  
Marco Battaglini ◽  
Rohit Lamba
Keyword(s):  
Stochastic Process ◽  
Time Horizon ◽  
Incentive Compatibility ◽  
Discount Factor ◽  
Principal Agent ◽  
Optimal Contract ◽  
Dynamic Contracting ◽  
First Order ◽  
Incentive Compatible ◽  
Optimal Dynamic

We explore the conditions under which the “first‐order approach” (FO approach) can be used to characterize profit maximizing contracts in dynamic principal–agent models. The FO approach works when the resulting FO‐optimal contract satisfies a particularly strong form of monotonicity in types, a condition that is satisfied in most of the solved examples studied in the literature. The main result of our paper is to show that except for nongeneric choices of the stochastic process governing the types' evolution, monotonicity and, more generally, incentive compatibility are necessarily violated by the FO‐optimal contract if the frequency of interactions is sufficiently high (or, equivalently, if the discount factor, time horizon, and persistence in types are sufficiently large). This suggests that the applicability of the FO approach is problematic in environments in which expected continuation values are important relative to per period payoffs. We also present conditions under which a class of incentive compatible contracts that can be easily characterized is approximately optimal.

Optimal dynamic pricing for an electricity retailer in the price-responsive environment of smart grid

2021 ◽  
Vol 130 ◽  
pp. 107004
Author(s):  
Hossein Taherian ◽  
Mohammad Reza Aghaebrahimi ◽  
Luis Baringo ◽  
Saeid Reza Goldani
Keyword(s):  
Smart Grid ◽  
Dynamic Pricing ◽  
Optimal Dynamic

Existence and uniqueness of optimal dynamic pricing and advertising controls without concavity

2018 ◽  
Vol 46 (2) ◽  
pp. 199-204 ◽  
Author(s):  
Bertrand Crettez ◽  
Naila Hayek ◽  
Georges Zaccour
Keyword(s):  
Dynamic Pricing ◽  
Existence And Uniqueness ◽  
Optimal Dynamic
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