Consider a risk-neutral principal and an agent with utility function Assume that the contract being provided to
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Assume that the contract being provided to the agent is based on the final outcome only and that the outcome density satisfies the monotone likelihood ratio property (MLRP). What is the optimal contract? Under what circumstances is the optimal contract linear in the final outcome? Convex? Concave?
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Financial Theory and Corporate Policy
ISBN: 978-0321127211
4th edition
Authors: Thomas E. Copeland, J. Fred Weston, Kuldeep Shastri
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