Related papers: Principal-Agent Hypothesis Testing
This paper explores the utility of agent-based simulations in realistically modelling market structures and sheds light on the nuances of optimal dealer strategies. It underscores the contrast between conclusions drawn from probabilistic…
We study a two-period moral hazard problem; there are two agents, with action sets that are unknown to the principal. The principal contracts with each agent sequentially, and seeks to maximize the worst-case discounted sum of payoffs,…
Risk statistic is a critical factor not only for risk analysis but also for financial application. However, the traditional risk statistics may fail to describe the characteristics of regulator-based risk. In this paper, we consider the…
In many predictive decision-making scenarios, such as credit scoring and academic testing, a decision-maker must construct a model that accounts for agents' propensity to "game" the decision rule by changing their features so as to receive…
A principal uses payments conditioned on stochastic outcomes of a team project to elicit costly effort from the team members. We develop a multi-agent generalization of a classic first-order approach to contract optimization by leveraging…
A principal and an agent can launch a project under unanimous consent. Their individual payoffs from the project depend on an underlying state, and the agent privately knows his own preference. The principal can conduct a test to learn…
Firms have access to abundant data on market participants. They use these data to target contracts to agents with specific characteristics, and describe these contracts in opaque terms. In response to such practices, recent proposed…
Many real-life contractual relations differ completely from the clean, static model at the heart of principal-agent theory. Typically, they involve repeated strategic interactions of the principal and agent, taking place under uncertainty…
The Probabilistic Serial mechanism is well-known for its desirable fairness and efficiency properties. It is one of the most prominent protocols for the random assignment problem. However, Probabilistic Serial is not incentive-compatible,…
As agentic systems move into real-world deployments, their decisions increasingly depend on external inputs such as retrieved content, tool outputs, and information provided by other actors. When these inputs can be strategically shaped by…
We consider a social planner faced with a stream of myopic selfish agents. The goal of the social planner is to maximize the social welfare, however, it is limited to using only information asymmetry (regarding previous outcomes) and cannot…
We introduce a statistical agent based model to describe the phenomenon of drug abuse and its dynamical evolution at the individual and global level. The agents are heterogeneous with respect to their intrinsic inclination to drugs, to…
While the success of large language models (LLMs) increases demand for machine-generated text, current pay-per-token pricing schemes create a misalignment of incentives known in economics as moral hazard: Text-generating agents have strong…
Agents can achieve effective interaction with previously unknown other agents by maintaining beliefs over a set of hypothetical behaviours, or types, that these agents may have. A current limitation in this method is that it does not…
Linear contracts are ubiquitous in practice, yet optimal contract theory often prescribes complex, nonlinear structures. We provide a distributional robustness justification for linear contracts. We study a principal-agent problem where the…
Clinical trials usually target average treatment effects, but treatment decisions are made for individuals. This tension motivates a common criticism of evidence-based medicine: a treatment that is beneficial on average may be inappropriate…
We introduce a model of probabilistic verification in mechanism design. The principal elicits a message from the agent and then selects a test to give the agent. The agent's true type determines the probability with which he can pass each…
A principal provides nondiscriminatory incentives for independent and identical agents. The principal cannot observe the agents' actions, nor does she know the entire set of actions available to them. It is shown, very generally, that any…
We introduce a novel model of contracts with combinatorial actions that accounts for sequential and adaptive agent behavior. As in the standard model, a principal delegates the execution of a costly project to an agent. There are $n$…
There is increasing interest in allocating treatments based on observed individual characteristics: examples include targeted marketing, individualized credit offers, and heterogeneous pricing. Treatment personalization introduces…