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Article

Dynamic Multiagent Incentive Contracts: Existence, Uniqueness, and Implementation

by 1,† and 2,*,‡
1
Department of Industrial Engineering, Clemson University, Clemson, SC 29634, USA
2
Department of Industrial and Operations Engineering, University of Michigan, Ann Arbor, MI 48109, USA
*
Author to whom correspondence should be addressed.
Current address: 277B Freeman Hall, Clemson, SC 29634 , USA.
Current address: 2883 IOE Building, 1205 Beal Avenue, Ann Arbor, MI 48109-2117, USA.
Mathematics 2021, 9(1), 19; https://doi.org/10.3390/math9010019
Received: 5 May 2020 / Revised: 19 December 2020 / Accepted: 20 December 2020 / Published: 23 December 2020
Multiagent incentive contracts are advanced techniques for solving decentralized decision-making problems with asymmetric information. The principal designs contracts aiming to incentivize non-cooperating agents to act in his or her interest. Due to the asymmetric information, the principal must balance the efficiency loss and the security for keeping the agents. We prove both the existence conditions for optimality and the uniqueness conditions for computational tractability. The coupled principal-agent problems are converted to solving a Hamilton–Jacobi–Bellman equation with equilibrium constraints. Extending the incentive contract to a multiagent setting with history-dependent terminal conditions opens the door to new applications in corporate finance, institutional design, and operations research. View Full-Text
Keywords: Nash equilibrium; moral hazard; differential game; dynamic programming Nash equilibrium; moral hazard; differential game; dynamic programming
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MDPI and ACS Style

Luo, Q.; Saigal, R. Dynamic Multiagent Incentive Contracts: Existence, Uniqueness, and Implementation. Mathematics 2021, 9, 19. https://doi.org/10.3390/math9010019

AMA Style

Luo Q, Saigal R. Dynamic Multiagent Incentive Contracts: Existence, Uniqueness, and Implementation. Mathematics. 2021; 9(1):19. https://doi.org/10.3390/math9010019

Chicago/Turabian Style

Luo, Qi, and Romesh Saigal. 2021. "Dynamic Multiagent Incentive Contracts: Existence, Uniqueness, and Implementation" Mathematics 9, no. 1: 19. https://doi.org/10.3390/math9010019

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