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arXiv · 1503.05416

The Principal-Agent Problem With Time Inconsistent Utility Functions

Boualem Djehiche·Peter Helgesson
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Abstract

In this paper we study a generalization of the continuous time Principal-Agent problem allowing for time inconsistent utility functions, for instance of mean-variance type. Using recent results on the Pontryagin maximum principle for FBSDEs we suggest a method of characterizing optimal contracts for such models. To illustrate this we consider a fully solved explicit example in the linear quadratic setting.

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Boualem Djehiche, Peter Helgesson. 2015-03-18. The Principal-Agent Problem With Time Inconsistent Utility Functions. https://arxiv.org/abs/1503.05416

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