Incentives and Performance with Optimal Money Management Contracts
研究了在投资委托、道德风险和代理人生产率不确定下，最优合同中激励的动态变化，发现委托人会在好业绩后增加激励以委托更多资本，并承诺降低未来激励以减少事前投资扭曲。
I characterize the dynamics of incentives in an optimal contract with investment delegation, moral hazard, and uncertainty about the agent’s productivity. The principal increases the agent’s incentives after good performance in order to delegate more capital to an agent with higher perceived productivity, thus implementing a convex pay-for-performance scheme. Moreover, the principal commits to reduce the agent’s future incentives in order to mitigate ex ante investment distortions. Methodologically, I provide a duality-based strategy to overcome technical challenges common to continuous-time contracting models with state variables. I also derive a sufficient condition to verify the validity of the first-order approach.