Contracting theory with competitive interacting agents
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Publication:4631456
DOI10.1137/17M1121202zbMATH Open1411.91354arXiv1605.08099OpenAlexW2402179957WikidataQ128203396 ScholiaQ128203396MaRDI QIDQ4631456FDOQ4631456
Authors: Romuald Elie, Dylan Possamaï 
Publication date: 29 March 2019
Published in: SIAM Journal on Control and Optimization (Search for Journal in Brave)
Abstract: In a framework close to the one developed by Holmstr"om and Milgrom [44], we study the optimal contracting scheme between a Principal and several Agents. Each hired Agent is in charge of one project, and can make efforts towards managing his own project, as well as impact (positively or negatively) the projects of the other Agents. Considering economic Agents in competition with relative performance concerns, we derive the optimal contracts in both first best and moral hazard settings. The enhanced resolution methodology relies heavily on the connection between Nash equilibria and multidimensional quadratic BSDEs. The optimal contracts are linear and each agent is paid a fixed proportion of the terminal value of all the projects of the firm. Besides, each Agent receives his reservation utility, and those with high competitive appetence are assigned less volatile projects, and shall even receive help from the other Agents. From the principal point of view, it is in the firm interest in our model to strongly diversify the competitive appetence of the Agents.
Full work available at URL: https://arxiv.org/abs/1605.08099
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competitionNash equilibriummoral hazardrelative performancemultidimensional quadratic BSDEsprincipal multiagents problems
Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10) Optimal stochastic control (93E20)
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