2015/05/18 by David Lagziel, Lagziel, David, Ehud Lehrer +1
Economics, Econometrics and Finance · #Business #Capital Investment and Risk Analysis #Decision maker #Earnings #Economic theories and models #Economics #FOS: Economics and business #Finance #Financial Markets and Investment Strategies #General Economics (econ.GN) #Investment (military) #Microeconomics #Monetary economics
paper · pdf · doi:10.48550/arxiv.1505.04587
published in arXiv (Cornell University) (Cornell University)
openalex publication_date 2015/05/18 · openalex created_date 2025/10/10 · openalex updated_date 2026/08/01
A decision maker (DM) has some funds invested through two investment firms. She wishes to allocate additional funds according to the firms' earnings. The DM, on the one hand, tries to maximize the total expected earnings, while the firms, on the other hand, try to maximize the overall expected funds they manage. In this paper we prove that, for every market, the DM has an optimal bonus policy such that the firms are motivated to act according to the interests of the DM. On the other hand, we also prove that the only policy that is optimal in every market, is independent of the actions and earnings of the firms.