Abstract
In this chapter, we take inspiration from Cvitanić and Zhang (Contract Theory in Continuous-Time Models, Springer-Verlag, Berlin, Heidelberg, 2013). Our approach is more analytic and relies on dynamic programming, whereas Cvitanić and Zhang rely more on BSDEs. We consider two decision-makers, called principal and agent. The principal proposes a contract to the agent. They have their own utility functions. When they share risk, they form a team, and the utility function of the team is a combination of the two utility functions.
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Cvitanić, J., Zhang, J., Contract Theory in Continuous-Time Models, Springer-Verlag, Berlin, Heidelberg, (2013)
Peng, S., Stochastic Hamilton-Jacobi-Bellman Equations, SIAM J. Control and Optimization, Vol 30, No. 2, (1992)
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Bensoussan, A. (2018). Principal Agent Control Problems. In: Estimation and Control of Dynamical Systems. Interdisciplinary Applied Mathematics, vol 48. Springer, Cham. https://doi.org/10.1007/978-3-319-75456-7_15
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DOI: https://doi.org/10.1007/978-3-319-75456-7_15
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