Comment on “Optimal Contract to Induce Continued Effort”
Publication
, Journal Article
Cao, P; Tian, F; Sun, P
Published in: Management Science
January 1, 2022
In this comment, we first use a counterexample to demonstrate that the optimal contract structure proposed in section 4 of the paper [Sun P, Tian F (2018) Optimal contract to induce continued effort. Management Sci. 64(9):4193–4217] can be wrong when the two players’ discount rates are different. We then specify correct optimal contract structures, which involve generalizing the contract space to allow random termination. Numerical study with a wide range of model parameters illustrates that such a random termination only occurs sparingly in optimal contracts. Moreover, the suboptimality gap, measured by the relative improvement of the optimal contract over the best contract without random termination, is extremely small.
Duke Scholars
Published In
Management Science
DOI
EISSN
1526-5501
ISSN
0025-1909
Publication Date
January 1, 2022
Volume
68
Issue
1
Start / End Page
796 / 808
Related Subject Headings
- Operations Research
- 46 Information and computing sciences
- 38 Economics
- 35 Commerce, management, tourism and services
- 15 Commerce, Management, Tourism and Services
- 08 Information and Computing Sciences
Citation
APA
Chicago
ICMJE
MLA
NLM
Cao, P., Tian, F., & Sun, P. (2022). Comment on “Optimal Contract to Induce Continued Effort”. Management Science, 68(1), 796–808. https://doi.org/10.1287/mnsc.2020.3927
Cao, P., F. Tian, and P. Sun. “Comment on “Optimal Contract to Induce Continued Effort”.” Management Science 68, no. 1 (January 1, 2022): 796–808. https://doi.org/10.1287/mnsc.2020.3927.
Cao P, Tian F, Sun P. Comment on “Optimal Contract to Induce Continued Effort”. Management Science. 2022 Jan 1;68(1):796–808.
Cao, P., et al. “Comment on “Optimal Contract to Induce Continued Effort”.” Management Science, vol. 68, no. 1, Jan. 2022, pp. 796–808. Scopus, doi:10.1287/mnsc.2020.3927.
Cao P, Tian F, Sun P. Comment on “Optimal Contract to Induce Continued Effort”. Management Science. 2022 Jan 1;68(1):796–808.
Published In
Management Science
DOI
EISSN
1526-5501
ISSN
0025-1909
Publication Date
January 1, 2022
Volume
68
Issue
1
Start / End Page
796 / 808
Related Subject Headings
- Operations Research
- 46 Information and computing sciences
- 38 Economics
- 35 Commerce, management, tourism and services
- 15 Commerce, Management, Tourism and Services
- 08 Information and Computing Sciences