Related papers: Opaque Contracts
Real-world contracts are often ambiguous. While recent work by D\"utting, Feldman, Peretz, and Samuelson (EC 2023, Econometrica 2024) demonstrates that ambiguous contracts can yield large gains for the principal, their optimal solutions…
We study the robust regulation of contracts in moral hazard problems. A firm offers a contract to incentivise a worker protected by limited liability. A regulator restricts the set of permissible contracts to (i) improve efficiency and (ii)…
We consider a seller who offers services to a buyer with multi-unit demand. Prior to the realization of demand, the buyer receives a noisy signal of their future demand, and the seller can design contracts based on the reported value of…
This article studies the problem of evaluating the information that a Principal lacks when establishing an incentive contract with an Agent whose effort is not observable. The Principal ("she") pays a continuous rent to the Agent ("he"),…
This work studies the online contract design problem. The principal's goal is to learn the optimal contract that maximizes her utility through repeated interactions, without prior knowledge of the agent's type (i.e., the agent's cost and…
Online platforms and regulators face a continuing problem of designing effective evaluation metrics. While tools for collecting and processing data continue to progress, this has not addressed the problem of "unknown unknowns", or…
In this paper, we consider a problem of contract theory in which several Principals hire a common Agent and we study the model in the continuous time setting. We show that optimal contracts should satisfy some equilibrium conditions and we…
We study a principal-agent problem with adverse selection, where the principal does not know the agent's true cost but must design a contract to optimize a specific criterion. Unlike standard screening frameworks that allow for…
In this paper we show how the relaxation techniques can be used to establish the existence of an optimal contract in presence of information asymmetry. The method we illustrate was initially motivated by the problem of designing optimal…
We introduce a two-agent problem which is inspired by price asymmetry arising from funding difference. When two parties have different funding rates, the two parties deduce different fair prices for derivative contracts even under the same…
A principal must decide between two options. Which one she prefers depends on the private information of two agents. One agent always prefers the first option; the other always prefers the second. Transfers are infeasible. One application…
This chapter will first present a principal-agent game-theoretic model to capture the interactions between one insurer and one user. The insurer is deemed as the principal who does not have incomplete information about user's security…
An employer contracts with a worker to incentivize efforts whose productivity depends on ability; the worker then enters a market that pays him contingent on ability evaluation. With non-additive monitoring technology, the interdependence…
We study a generic principal-agent problem in continuous time on a finite time horizon. We introduce a framework in which the agent is allowed to employ measure-valued controls and characterise the continuation utility as a solution to a…
We present a continuous-time contract whereby a top-level player can incentivize a hierarchy of players below him to act in his best interest despite only observing the output of his direct subordinate. This paper extends Sannikov's…
This paper studies optimal Public Private Partnerships contract between a public entity and a consortium, in continuous-time and with a continuous payment, with the possibility for the public to stop the contract. The public ("she") pays a…
There are several aspects of data markets that distinguish them from a typical commodity market: asymmetric information, the non-rivalrous nature of data, and informational externalities. Formally, this gives rise to a new class of games…
Fraud can pose a challenge in many resource allocation domains, including social service delivery and credit provision. For example, agents may misreport private information in order to gain benefits or access to credit. To mitigate this, a…
We study a model of moral hazard with heterogeneous beliefs where each of agent's actions gives rise to a pair of probability distributions over output levels, one representing the beliefs of the agent and the other those of the principal.…
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…