In search of a unicorn: Dynamic agency with endogenous investment opportunities
研究了代理人（如SPAC发起人、风投合伙人）通过搜寻随机出现的投资机会时，最优动态契约如何设计以激励其及时诚实报告，并预测了过度投资的程度与企业和行业特征的关系。
We study the optimal dynamic contract that provides incentives for an agent (e.g., SPAC sponsor, VC general partner, CTO) to exploit investment opportunities/targets that arrive randomly over time via a costly search process. The agent is privy to the arrival as well as to the quality of the target and can take advantage of this for rent extraction during the search process and the ensuing production. The optimal contract provides the agent with incentives for timely and truthful reporting via a time-varying threshold for investment and an internal charge for the time spent on search. In the equilibrium, as time elapses, the charge becomes progressively higher while the investment threshold is progressively lower, resulting in overinvestment at a time-varying degree. Our model generates empirically testable predictions regarding investments (such as M&As, hedge fund activism, VC investing, SPACs, and internal innovations), linking the degree of overinvestment to observable firm and industry characteristics. • Optimal dynamic contract for the search and use of investment opportunities/targets. • Adverse selection arises regarding the arrival of targets and their quality. • Optimal contract involves a progressively declining hurdle for investments. • The investments hurdle is always below the first-best, implying overinvestment. • Our results shed light on internal innovation, M&A, SPACs, VC and HFA investments.