Ilia Krasikov

Working papers

Dynamic Pricing with Rohit Lamba in 2018 Draft coming soon
Of Restarts and Shutdowns: Dynamic Contracts with Unequal Discounting with Rohit Lamba and Thomas Schacherer in 2018 Abstract: A large supplier (principal) contracts with a small firm (agent) to repeatedly provide working capital in return for payments. The total factor productivity of the agent is private and follows a Markov process. Moreover, the agent is less patient than the principal. We solve for the optimal contract... A large supplier (principal) contracts with a small firm (agent) to repeatedly provide working capital in return for payments. The total factor productivity of the agent is private and follows a Markov process. Moreover, the agent is less patient than the principal. We solve for the optimal contract in this environment. Distortions are pervasive and efficiency unattainable. The optimal contract is characterized by two key properties: restart and shutdown, which capture various aspects of contracts offered in the marketplace. The optimal distortions are completely pinned down by the number of low TFP shocks since the last high shock. Once a high shock arrives, the contract loses memory and repeats the same cycle, we call this endogenous resetting feature restart. If ex ante agency frictions are high, the principal commits to not serving the low type, we call this shutdown. The principal prefers a patient agent if the interim agency friction, as measured by the persistence of the private information is large, and she prefers an impatient agent if it is small. Finally, when global incentive constraints bind, we (i) provide the complete recursive solution, and (ii) characterize a simpler incentive compatible contract that is approximately optimal. More Hide
A Theory of Dynamic Contracting with Financial Constraints with Rohit Lamba in 2017 Abstract: We study a dynamic principal-agent model where the agent has access to a persistent private technology but is strapped for cash. Financial constraints are generated by the periodic interaction between incentives (private information) and a strong notion of feasibility (being strapped for cash)... We study a dynamic principal-agent model where the agent has access to a persistent private technology but is strapped for cash. Financial constraints are generated by the periodic interaction between incentives (private information) and a strong notion of feasibility (being strapped for cash). This interaction produces dynamic distortions that are a sum of two effects: backloading of incentives and illiquidity. Bad technology shocks increase distortions and monotonically push the optimal contract further away from efficiency. An endogenous number of good shocks is required for the contract to become liquid, and then eventually efficient. Efficiency is an absorbing state that is reached almost surely. Persistence of private information increases the variance of total economic surplus generated by the model, and decreases the rate at which surplus converges to its efficient value. The key predictions continue to hold in the continuous time setting. A simple economic implementation of the optimal contract is also provided. More Hide

Coming soon

Competition in Persuasion with Hard Evidence with Ce Liu
Optimal Dynamic Allocation with Costly Verification with Rohit Lamba and Yunan Lee
Firm Dynamics with Inefficient Intermediation with Rohit Lamba