Robust Contracting for Sequential Search
Fuente:
arXiv
Saved in:
| Main Authors: | , , |
|---|---|
| Format: | Preprint |
| Published: |
2025
|
| Subjects: | |
| Online Access: | |
| Tags: |
Add Tag
No Tags, Be the first to tag this record!
|
| _version_ | 1866915496388984832 |
|---|---|
| author | Durandard, Théo Vaidya, Udayan Xu, Boli |
| author_facet | Durandard, Théo Vaidya, Udayan Xu, Boli |
| contents | A principal contracts with an agent who sequentially searches over projects to generate a prize. The principal initially knows only one of the agent's available projects and evaluates a contract by its worst-case performance. We characterize the principal's robustly optimal contracts, which are all debt-like: the agent is only paid when the prize exceeds a threshold. Debt is optimal because it preserves the option value of continued exploration. Our characterization encompasses several common contract forms, including pure debt, debt-plus-equity, and capped-earnout debt. We identify settings in which each of these contracts is uniquely optimal. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2504_17948 |
| institution | arXiv |
| publishDate | 2025 |
| record_format | arxiv |
| spellingShingle | Robust Contracting for Sequential Search Durandard, Théo Vaidya, Udayan Xu, Boli Theoretical Economics A principal contracts with an agent who sequentially searches over projects to generate a prize. The principal initially knows only one of the agent's available projects and evaluates a contract by its worst-case performance. We characterize the principal's robustly optimal contracts, which are all debt-like: the agent is only paid when the prize exceeds a threshold. Debt is optimal because it preserves the option value of continued exploration. Our characterization encompasses several common contract forms, including pure debt, debt-plus-equity, and capped-earnout debt. We identify settings in which each of these contracts is uniquely optimal. |
| title | Robust Contracting for Sequential Search |
| topic | Theoretical Economics |
| url | https://arxiv.org/abs/2504.17948 |