Computing Optimal Contracts in Series-Parallel Heterogeneous Combinatorial Agencies

We study an economic setting in which a principal motivates a team of strategic agents to exert costly effort toward the success of a joint project. The action taken by each agent is hidden and affects the (binary) outcome of the agent’s individual task in a stochastic manner. A Boolean function, called technology, maps the individual tasks’ outcomes to the outcome of the whole project. The principal induces a Nash equilibrium on the agents’ actions through payments that are conditioned on the project’s outcome (rather than the agents’ actual actions) and the main challenge is that of determining the Nash equilibrium that maximizes the principal’s net utility, referred to as the optimal contract. Babaioff, Feldman and Nisan suggest and study a basic combinatorial agency model for this setting, and provide a full analysis of the AND technology. Here, we concentrate mainly on OR technologies and on series-parallel (SP) technologies, which are constructed inductively from the...

• Type: Conference
• Year: 2009
• Where: WINE
• Authors: Yuval Emek, Michal Feldman
• Keywords: Economy, Individual Tasks, Nash Equilibrium, Optimal Contract, WINE 2009