Robust Agreement

First, the main reason for entering into a contract is to provide specific information about the services to be provided and the costs to be incurred for those services. If the provider has been properly monitored, i.e. it can provide the services defined in the contract, the shipper has achieved its first objective by selecting the right provider to meet its needs. What other benefit could they seek? Oh, yes, a much lower rate! We consider incentive compensation when the company has uncertainties about the distribution of outputs based on effort: the parameters of the distribution of the probability of exit are defined in ellipsoid uncertainty. The company evaluates each contract on the basis of its most pessimistic performance on all possible parameters in the uncertainty settled. Similarly, the incentive-compatible condition for the agent must apply to all possible parameters in the uncertainty set. The company is financially risk neutral and the representative is responsible. We find that if the agent is financially risk neutral, the optimal solid contract is a linear contract – paying the agent a basic payment and a fixed share of the service. In addition, the linear contract is the only type of contracts that are robust on the uncertainty of the parameters.

If modellungewiss is on a general allocation of expenditure according to effort, we show that a generalized linear contract is exceptionally optimal. If the agent is risk averse and has a linear utility, the only optimal contract is a linear contract, which consists of progressive fixed payments and linear rewards with progressive commission rates. We also provide analysis of the trade-off between robustness and the most pessimistic performance and we show that our results are robust for a large number of settings, including cases of general lp uncertainties, multiple levels of effort, etc. Our paper provides a new explanation for the popularity of linear and linear online contracts in practice and introduces a flexible approach to robust contract design with model uncertainty. Well, if that`s the case, the sender didn`t do a good job of checking the service provider. Are there other airlines that can offer the same level of service at a lower cost? If this is the case, the shipper should enter into a contract with the service provider who agrees to provide the same level of service at a lower cost. On the other side of the coin, the shipper must agree to pay the costs mentioned in the contract for the services provided, once the provider has been properly checked and selected. It`s really that simple! KEEP IN MIND, ENTERING INTO CONTRACTS MUST BENEFIT BOTH PARTIES EQUALLY! The conclusion of these written agreements is mainly due to the fact that there is indeed a real meeting of minds on the services to be provided and on the fees to be paid for those services. Contracts are also bilateral agreements and both parties must therefore accept amendments; Changes cannot be made unilaterally by either party. Finally, both parties should guarantee what we call the “opportunity for delivery,” which means that both parties can fulfill their contractual obligations before entering into such agreements.