Stéphane Villeneuve

A continuous-time dynamic contracting problem with limited liability and finite horizon

We perform a detailed study of a principal--agent problem in a continuous time version of the celebrated Holmstr\"om--Milgrom model (Econometrica 55 (2), 1987) where we add limited liability for the Agent. We develop a probabilistic methodology to prove that the Principal's value function is the unique bounded classica...