Download or read book Optimal Retention in Principal Agent Models written by Jeffrey Banks and published by . This book was released on 2008 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies the interaction between a single long-lived principal and a series of short-lived agents in the presence of both moral hazard and adverse selection. We assume that the principal can influence the agents' behavior only through her choice of a retention rule; this rule is further required to be sequentially rational (i.e., no precommitment is allowed). We provide general conditions under which equilibria exist in which (a) the principal adopts a 'cut-off' rule under which agents are retained only when the reward they generate exceeds a critical bound; and (b) agent separate according to type, with better agents taking superior actions. We show that in equilibrium, a retained agent's productivity is necessarily declining over time, but that retained agents are also more productive on average than untried agents due to selection effects. Finally, we show that for each given type, agents of that type are more productive in the presence of adverse selection than when there is pure moral hazard (i.e., when that type is the sole type of agent in the model); nonetheless, adding uncertainty about agent-types cannot benefit the principal except in uninteresting cases.

Download or read book Asset Securitization and Optimal Retention written by Mr.John Kiff and published by International Monetary Fund. This book was released on 2010-03-01 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper builds on recent research by Fender and Mitchell (2009) who show that if financial institutions securitize loans, retaining an interest in the equity tranche does not always induce the securitizer to diligently screen borrowers ex ante. We first determine the conditions under which this scenario becomes binding and further illustrate the implications for capital requirements. We then propose an extension to the existing model and also solve for optimal retention size. This also allows us to capture feedback effects from capital requirements into the maximization problem. Preliminary results show that equity tranche retention continues to best incentivize loan screening.

Download or read book Essays on Principal agent Models written by Nadide Banu Olcay and published by . This book was released on 2012 with total page 173 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of three chapters on principal-agent models. Chapter 2 studies an optimal contract design problem in a principal-framework whereas chapter 3 is an empirical investigation of the incentive contracts in the market of top executives. Chapter 4 is a theoretical chapter exploring welfare impacts of the structure in a top-level bureaucracy. In the first chapter, I consider a dynamic moral hazard model where the principal offers a series of short-run contracts. I study the optimal mix of two alternative instruments for incentive provision: a performance based wage (a "carrot") and a termination threat (a "stick"). At a given point in time, these instruments are substitutes in the provision of incentives. I am particularly interested in the dynamic interaction of these two instruments. Both carrot and stick are used more intensively as the agent approaches the end of her finite life. The sharing of the surplus of the relationship plays a key role: a termination threat is included in the optimal contract if and only if the agent's expected future gain from the relationship is sufficiently high, compared to the principal's expected future gain. Also, a termination threat is more likely to be optimal if output depends more on "luck" than on effort, if the discount factor is high, or if the agent's productivity is low. Having inspired from chapter 2, chapter 3 of the dissertation is an empirical study of the contracts of Chief Executive Officers (CEO). Direct pay for performance and a threat of termination when performance is low are two important instruments to incentivize CEOs. This chapter is an empirical analysis of the use of these two incentive devices and how they depend on tenure and managerial ability. For managers promoted from within a firm, ability is proxied by their age at the time of promotion. For managers hired from outside, I instead rely on constructed measures of "reputation", based on media citations over time windows of different length. Using a sample of firms, listed in S & P 1500 over the period 1998-2008, I find that CEO compensation and the threat of forced turnover are used as incentive devices throughout tenure. Even though the results indicate that pay increases as the CEO is more senior in her tenure, there is no strong evidence that termination threat follows a particular time pattern. For outsider CEOs, a better reputation increases pay and decreases the likelihood of forced turnover, with stronger effects for more current reputational measures. Regarding the impacts of reputation on the tenure-pay relationship, only more current measures have a significant and negative effect. Managerial ability, as proxied by age-at-promotion for insiders and as proxied by reputation for outsiders, decreases the likelihood of forced turnover. More current reputation measures, as in the case of total pay, have a larger impact of likelihood of turnover. Chapter 4 investigates the welfare implications of multiple principals in the highest level of bureaucracy. An agent has to carry out two separate tasks, which can either be organized by two separate principals, or combined under one principal. The relationship between the top level (the principals) and the lower level (agent) of the bureaucracy is a "principal-agent problem". The existence of multiple principals generates a "common agency". The analysis reveals that the optimal hierarchy depends on the existence of "rents" from office that the principals enjoy. If there are no rents, the two systems are equally welfare-efficient. A single-principal model dominates common agency otherwise.

Download or read book Optimal Form of Retention for Securitized Loans Under Moral Hazard written by Georges Dionne and published by . This book was released on 2015 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Do Elections Always Motivate Incumbents Experimentation vs Career Concerns written by Mr.Eric Le Borgne and published by International Monetary Fund. This book was released on 2003-03-01 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies a principal-agent model of the relationship between an incumbent officeholder and the electorate, where the officeholder is initially uninformed about her ability. If officeholder effort and ability interact in the "production function" that determines performance in office, then an officeholder has an incentive to experiment-that is, raise effort so that performance becomes a more accurate signal of her ability. Elections reduce the experimentation effect, and the reduction in this effect may more than offset the positive "career-concerns" effect of elections on effort. Moreover, when this occurs, appointment of officeholders may Pareto-dominate elections.

Download or read book Deterministic Mechanisms are Optimal in Standard Principal Agent Models written by Roland Strausz and published by . This book was released on 2004 with total page 22 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book On the Existence of Optimal Contract Mechanisms for Incomplete Information Principal agent Models written by E. J. Balder and published by . This book was released on 1993 with total page 13 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Optimal Imperfection written by George Downs and published by Princeton University Press. This book was released on 2021-02-09 with total page 180 pages. Available in PDF, EPUB and Kindle. Book excerpt: "Domestic politics matters" has become a rallying cry for international relations scholars over the past decade, yet the question still remains: Just how does it matter? In this book, George Downs and David Rocke argue that an important part of the international impact of domestic politics springs from the institutional responses to its many uncertainties. This impact is due not so much to the errors in judgment these uncertainties can cause as to the strategic and institutional consequences of knowing that such errors are possible. The heart of the book is its formal analysis of how three kinds of domestic uncertainty have shaped international relations through their influence on three very different institutions. One chapter deals with the decision rules that citizens create to cope with uncertainty about the quality of their representation, and how these can lead to the paradoxical "gambling for resurrection" effect. Another chapter describes the extent to which the weak enforcement provisions of GATT can be understood as a mechanism to cope with uncertain but intermittent interest group demands for protection. The third chapter looks at the impact of uncertainty on the creation, survival, and membership of multilateral regulatory institutions, such as the Montreal Protocol and EU, when some states question the capacity of other states to meet their treaty obligations.

Download or read book Existence of Optimal Mash Contracts of a Principal Agent Model Single and Multiperiod Considerations written by and published by . This book was released on 1987 with total page 306 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book A Repeated Principal Agent Model with On the Job Search written by Daniel Herbold and published by . This book was released on 2016 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes how on-the-job search (OJS) by an agent impacts the moral hazard problem in a repeated principal-agent relationship. OJS is found to constitute a source of agency costs because efficient search incentives require that the agent receives all gains from trade. Further, the optimal incentive contract with OJS matches the design of empirically observed compensation contracts more accurately than models that ignore OJS. In particular, the optimal contract entails excessive performance pay plus efficiency wages. Efficiency wages reduce the opportunity costs of work effort and hence serve as a complement to bonuses. Thus, the model offers a novel explanation for the use of efficiency wages. When allowing for renegotiation, the model generates wage and turnover dynamics that are consistent with empirical evidence. I argue that the model contributes to explaining the concomitant rise in the use of performance pay and in competition for high-skill workers during the last three decades.

Download or read book An Exploration of the Principal agent Framework Investigation of Model Solution Methods and Optimal Contracts written by Stefan Herytash and published by . This book was released on 2021 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Game Theory in Management Accounting written by David Mueller and published by Springer. This book was released on 2017-09-21 with total page 453 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book demonstrates what kind of problems, originating in a management accounting setting, may be solved with game theoretic models. Game theory has experienced growing interest and numerous applications in the field of management accounting. The main focus traditionally has been on the field of non-cooperative behaviour, but the area of cooperative game theory has developed rapidly and has received increasing attention. Intensive research, in combination with the changing culture of publishing, has produced a nearly unmanageable number of publications in the areas concerned. Therefore, one main purpose of this volume is providing an intensive analysis of the intersection of these areas. In addition, the book strengthens the relationship between the theory and the practical applications and it illustrates the two-sided relationship between game theory and management accounting: new game theoretic models offer new fields of applications and these applications raise new questions for the theory.

Download or read book The Oxford Handbook of Public Accountability written by Mark Bovens and published by OUP Oxford. This book was released on 2014-05-15 with total page 807 pages. Available in PDF, EPUB and Kindle. Book excerpt: Over the past two decades public accountability has become not only an icon in political, managerial, and administrative discourse but also the object of much scholarly analysis across a broad range of social and administrative sciences. This handbook provides a state of the art overview of recent scholarship on public accountability. It collects, consolidates, and integrates an upsurge of inquiry currently scattered across many disciplines and subdisciplines. It provides a one-stop-shop on the subject, not only for academics who study accountability, but also for practitioners who are designing, adjusting, or struggling with mechanisms for accountable governance. Drawing on the best scholars in the field from around the world, The Oxford Handbook of Public Accountability showcases conceptual and normative as well as the empirical approaches in public accountability studies. In addition to giving an overview of scholarly research in a variety of disciplines, it takes stock of a wide range of accountability mechanisms and practices across the public, private and non-profit sectors, making this volume a must-have for both practitioners and scholars, both established and new to the field.

Download or read book Handbook of Quantitative Supply Chain Analysis written by David Simchi-Levi and published by Taylor & Francis. This book was released on 2004-05-31 with total page 840 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Handbook is a comprehensive research reference that is essential for anyone interested in conducting research in supply chain. Unique features include: -A focus on the intersection of quantitative supply chain analysis and E-Business, -Unlike other edited volumes in the supply chain area, this is a handbook rather than a collection of research papers. Each chapter was written by one or more leading researchers in the area. These authors were invited on the basis of their scholarly expertise and unique insights in a particular sub-area, -As much attention is given to looking back as to looking forward. Most chapters discuss at length future research needs and research directions from both theoretical and practical perspectives, -Most chapters describe in detail the quantitative models used for analysis and the theoretical underpinnings; many examples and case studies are provided to demonstrate how the models and the theoretical insights are relevant to real situations, -Coverage of most state-of-the-art business practices in supply chain management.

Download or read book Existence of Optimal Mechanisms in Principal Agent Problems written by Ohad Kadan and published by . This book was released on 2012 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We provide general conditions under which principal-agent problems admit mechanisms that are optimal for the principal. Our result covers as special cases those in which the agent has no private information - i.e., pure moral hazard - as well as those in which the agent's only action is a participation decision - i.e., pure adverse selection. We allow multi-dimensional actions and signals, as well as both financial and non-financial rewards. Beyond measurability, we require no a priori restrictions on the space of mechanisms. Consequently, our optimal mechanisms are optimal among all measurable mechanisms. A key to obtaining our result is to permit randomized mechanisms. We also provide conditions under which randomization is unnecessary.

Download or read book Optimal Unemployment Insurance written by Andreas Pollak and published by Mohr Siebeck. This book was released on 2007 with total page 204 pages. Available in PDF, EPUB and Kindle. Book excerpt: Designing a good unemployment insurance scheme is a delicate matter. In a system with no or little insurance, households may be subject to a high income risk, whereas excessively generous unemployment insurance systems are known to lead to high unemployment rates and are costly both from a fiscal perspective and for society as a whole. Andreas Pollak investigates what an optimal unemployment insurance system would look like, i.e. a system that constitutes the best possible compromise between income security and incentives to work. Using theoretical economic models and complex numerical simulations, he studies the effects of benefit levels and payment durations on unemployment and welfare. As the models allow for considerable heterogeneity of households, including a history-dependent labor productivity, it is possible to analyze how certain policies affect individuals in a specific age, wealth or skill group. The most important aspect of an unemployment insurance system turns out to be the benefits paid to the long-term unemployed. If this parameter is chosen too high, a large number of households may get caught in a long spell of unemployment with little chance of finding work again. Based on the predictions in these models, the so-called "Hartz IV" labor market reform recently adopted in Germany should have highly favorable effects on the unemployment rates and welfare in the long run.

Download or read book Optimal Contracts in Continuous Time Principal agent Problems written by Hui Ou-Yang and published by . This book was released on 1998 with total page 280 pages. Available in PDF, EPUB and Kindle. Book excerpt: