Multiagent Incentive Contracts: Existence, Uniqueness and Implementation
17 Pages Posted: 19 Sep 2017 Last revised: 30 Sep 2019
Date Written: September 17, 2017
Incentive contracts with multiple agents is a classical decentralized decision-making problem with asymmetric information. Contract design aims to incentivize noncooperative agents to act in the principal's interest over a planning horizon. We extend the single-agent incentive contract to a multiagent setting with history-dependent terminal conditions. Our contributions include: (a) Finding sufficient conditions for the existence of optimal multiagent incentive contracts and conditions under which they form a unique Nash Equilibrium; (b) Showing that the optimal multiagent incentive contracts can be solved by a Hamilton-Jacobi-Bellman (HJB) equation with equilibrium constraints; (c) Proposing a backward iterative algorithm to solve the problem.
Keywords: Principal Multi-Agent Problem, Continuous-Time Approach, Kakutani Fixed Point Theorem, Subgame Perfect Equilibrium, Hamilton-Jacobi-Bellman Equation, Differential Game
JEL Classification: C, G
Suggested Citation: Suggested Citation