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How to build stable relationships between people who lie and cheat. (English) Zbl 1305.91176

Summary: This is a talk delivered at the conference “Mathematics in a Complex World”, on the occasion of the 150th anniversary of the Politecnico di Milano. Asymmetry of information, i.e. the possibility for human beings to hide their information, or not to keep their promises, is a fundamental fact of social life, and must be taken into account. I will show how this creates complexity, even in the very simple situation of a contract between two parties, one of whom commits to work for the other, but cannot be monitored.

MSC:

91B44 Economics of information
49N90 Applications of optimal control and differential games
91B40 Labor market, contracts (MSC2010)
93E20 Optimal stochastic control
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References:

[1] Biais, Mariotti, Rochet, Villeneuve, Large risks, limited liability and dynamic moral hazard, EMA (2010), 73-118 · Zbl 1202.91182
[2] Biais, Mariotti, Plantin, Rochet, Dynamic Security Design: Convergence to Continuous Time and Asset Pricing Implications, The Review of Economic Studies (2007) p. 345-390. · Zbl 1297.91135
[3] Cvitanic and Zhang, Contract theory in continuous-time models, Springer, 2012
[4] Ekeland and Rochet, work in progress
[5] Sannikov A: continuous-time version of the principal-agent problem. RES 75, 957–984 (2008) · Zbl 1141.91612
[6] Sannikov, Contracts: the theory of dynamic principal-agent relationships and the continuous-time approach, Working paper, 2012
This reference list is based on information provided by the publisher or from digital mathematics libraries. Its items are heuristically matched to zbMATH identifiers and may contain data conversion errors. In some cases that data have been complemented/enhanced by data from zbMATH Open. This attempts to reflect the references listed in the original paper as accurately as possible without claiming completeness or a perfect matching.