The Effects and the Design of Incentives in Dynamic, Non-Repeated Principal-Agent Models

• Applicant: Professor Dr. Philipp Weinschenk
• Subject Area: Economic Theory
• Term: from 2019 to 2024
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 431144273

This project seeks to analyze the effects and optimal design of incentives in dynamic principal-agent models, that are not modeled as repeated games. In particular, it should be analyzed if and when stronger incentives have negative effects on agents' efforts and deter or defer success. Furthermore, it should be analyzed how a principal optimally designs intertemporal incentives if renegotiations cannot be ruled out. A model that allows us to capture dynamic, non-repeated principal-agent relationships will be developed. Its analysis will deliver several new and important insights, which are relevant from a theoretical as well as a practical perspective. The model could, for example, explain why many measures and projects are delayed or unnecessary fail. The present research project would thus significantly contribute to a better understanding of the effects and design of dynamic incentive systems.

• DFG Programme: Research Grants