Businesses often face the problem of providing incentives for agents to work effectively together on projects that develop over time. The agents' costly and unobservable effort jointly affects the survival of the project and thus the expected value of its cash now. A key feature of many contracting problems with multiple agents is that the agents exert effort at different times: some at the outset and some over time. The optimal timing of compensation reflects the timing of effort with payment for up-front effort preceding compensation for continuous effort. Deferring payment for agents exerting effort over time improves their incentives without impairing incentives for the up-front effort because this effort is sunk once the project is set up. The exact pattern of compensation between the agents with continuous effort depends on the relative severity of their moral hazard problems. In a special case where moral hazards are equally severe, the agents equally split the cash flow once it becomes available. This study suggests an approach to understanding a broad set of contracting problems in economics and finance. It rationalizes business conventions such as deferred compensation for top executives, the 50:50 split between law firm partners, and profit shares of influential directors (or lead actors) and residual claims of producers in the movie industry. Furthermore, the model predicts business failures such as the crisis in the mortgage industry due to the lack of characteristics suggested in the optimal contract.

本文首先建立两部门内生增长开放经济的动态模型，然后在此基础上将其发展为一个中国加入世贸组织的不可逆性决策的随机微分数学模型。通过求出该随机问题的最优解，从而得出中国加入世贸的最佳时机，同时也讨论了加快或减慢中国入世的相关因素。 This paper develops a simple theoretical open economy model to analysis the irreversible decision of China’s accession to the World Trade Organization (WTO). From the optimal solution of a stochastic differential equation based on the option theory in financial economics, it derived the optimal timing for China’s entry into the WTO and discussed what factors that may speed up or slow down the entry.

Optimal Timing and Optimal Intensity of Real Estate Development Abstract The traditional real option approach treat firms as price taker and at the same time the firm is assumed to have monopoly power because no competition or future competitive entry is not considered in most of the real option literature. In this article we assume the real estate developer has monopoly power in a real estate submarket, given the nature of real estate market. The developer makes the timing decision as well as the intensity decision at the same time. We model the developer decision in the framework of the real option and derived the optimal timing and optimal intensity of real estate development of a certain real estate project. Our Result shows that not only the uncertainty but also the low rent sensitivity of housing demand will lead to defer of real estate development. And both the timing decision and intensity decision are sensitive to the demand factors besides the uncertainty effect.

In a real options and game-theoretic framework, this paper examines the optimal R&D investment timing of an incumbent under uncertainty, which faces the threat of preemption by a potential entrant. We incorporate incomplete information into the model by assuming that the incumbent does not know the entrant’s investment timing but know its distribution. We find that incomplete information reduces the erosion of waiting option value by the competition, and therefore waiting is still valuable even in the presence of preemption and competition. The entrant's hazard rate has the impact on the incumbent's optimal investment timing: the more the hazard rate is, the earlier the incumbent invests.