Moral hazard under ambiguity

Thibaut Mastrolia (1, 2) , Dylan Possamaï (2)

1 Université Paris Dauphine-PSL
2 CEREMADE - CEntre de REcherches en MAthématiques de la DEcision

In this paper, we extend the Holmström and Milgrom problem [30] by adding uncertainty about the volatility of the output for both the agent and the principal. We study more precisely the impact of the "Nature" playing against the Agent and the Principal by choosing the worst possible volatility of the output. We solve the first-best and the second-best problems associated with this framework and we show that optimal contracts are in a class of contracts similar to [9, 10], linear with respect to the output and its quadratic variation. We compare our results with the classical problem in [30].

Mots clés: Risk-sharing; moral hazard; principal-agent; second-order BSDEs; volatility uncertainty

Domaines: Probabilités [math.PR]

Thibaut Mastrolia, Dylan Possamaï. Moral hazard under ambiguity. Journal of Optimization Theory and Applications, 2018, 179, pp.452-500. ⟨10.1007/s10957-018-1230-8⟩. ⟨hal-01220331⟩