We present a continuous-time contract whereby a top-level player can incentivize a hierarchy of players below him to act in his best interest despite only observing the output of his direct subordinate. This paper extends Sannikov’s approach from a situation of asymmetric information between a principal and an agent to one of hierarchical information between several players. We develop an itera...

The principal-agent models may be employed to elucidate central problems in interaction between principals and agents in both policy implementation and public policy-making concerning performance and remuneration. One then hits upon the double principal-agent relationships that are typical of the policy cycle, from policy-making to policy implementation and back: 1) government as principal for ...

This paper examines the relationship between distributor backorder performance and its inventory levels under Vendor Managed Inventory (VMI) in a supply chain that consists of distributors and manufacturers. We construct a principal-agent model to show that distributors' inventory managed by manufacturers can be used to induce distributor efforts, which are unobservable to the manufacturers, in...

We provide su¢ cient conditions for the validity of the …rst-order approach for two-period dynamic moral hazard problems where the agent can save and borrow secretly. The …rst-order approach is valid if the following conditions hold: i) the agent has nonincreasing absolute risk aversion utility (NIARA), ii) the output technology has monotone likelihood ratios (MLR), and iii) the distribution fu...

In the classical principal–agent problem, a riskneutral agent bears all the risk. This particular solution, while acknowledged as a special case, is prominent in the minds of economists because the more general risk-averse case does not easily yield numerical results. For example, Jensen and Murphy (1990) find a divergence between the risk actually borne by chief executive officers and the risk...

We consider a principal-agent setting in which the principal has superior expertise to assess performance of the agent. The agent, if capable and making an effort, generates successes exponentially distributed over time. The principal observes successes and may disclose them to the agent via (i) a feedback policy, if transfers are not allowed, or (ii) a wage policy, if transfers are allowed. We...

This paper analyzes a principal-agent model in which the agent has private information before contracting with the principal and ex-post private decision. These inputs determine the random output accruing to the principal. We characterize the optimal menu of contracts between a risk-neutral principal and a risk-neutral agent when the agent has limited liability on his transfer or utility levels...

Changes in travelers’ booking habits and the evolution of technology have come to threaten existence traditional travel agents (TAs). However, cruise industry still relies heavily on TAs as its main distribution channel. A qualitative study was conducted investigate networks, relationships, power between companies using a triangulation method via tourism supply chain model. Principal–agent (P-A...