In An Inquiry in the Nature and Causes of the Wealth of Nations, Adam Smith warned that directors of joint-stock companies, being the managers ‘of other people’s money y are apt to consider attention to small matters as not for their master’s honour’ (Smith, 1776, Book 5: Chapter 1). Smith’s assertion reflects the long-standing interest of economists in the consequences of separating the owners...

Collecting and processing large amounts of data is becoming increasingly crucial in our society. We model this task as evaluating a function f over a large vector x = (x1, . . . , xn), which is unknown, but drawn from a publicly known distribution X. In our model learning each component of the input x is costly, but computing the output f(x) has zero cost once x is known. We consider the proble...

We consider a continuous-time setting, in which the agent can control both the drift and the volatility of the underlying process. The principal can observe the agent’s action and can offer payment at a continuous rate, as well as a bulk payment at the end of the fixed time horizon. In examples, we show that if the principal and the agent have the same CRRA utility, or they both have (possibly ...

This paper contributes to the theoretical and numerical analysis of discrete time dynamic principal agent problems with continuous choice sets. We first provide a new and simplified proof for the recursive reformulation of the sequential dynamic principal agent relationship. Next we prove the existence of a unique solution for the principal’s value function, which solves the dynamic programming...

This study analyzes the effect of corporate governance (CG) quality on principal-agent (PA) and principal-principal (PP) conflict in Indonesia while also controlling for potential endogeneity through use two-stage least squares (2SLS) regression. The results PA (measured by operating expense ratio asset utilization ratio) are consistent with notion that better CG leads to a lower level conflict...