A Principal-Agent Model for Ethical AI: Optimal Contracts and Incentives for Ethical Alignment

Dae-Hyun Yoo and Caterina Giannetti

Discussion Papers from Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy

Abstract: This paper presents a principal-agent model for aligning artificial intelligence (AI) behaviors with human ethical objectives. In this framework, the end-user acts as the principal, offering a contract to the system developer (the agent) that specifies desired ethical alignment levels for the AI system. This incentivizes the developer to align the AI’s objectives with ethical considerations, fostering trust and collaboration. When ethical alignment is unobservable and the developer is risk-neutral, the optimal contract achieves the same alignment and expected utilities as when it is observable. For observable alignment levels, a fixed reward is uniquely optimal for strictly risk-averse developers, while for risk-neutral developers, a fixed reward is one of several optimal options. Our findings demonstrate that even a basic principal-agent model can enhance the understanding of how to balance responsibility between users and developers in the pursuit of ethical AI. Users seeking higher ethical alignment must compensate developers appropriately, and they also share responsibility for ethical AI by adhering to design specifications and regulations.

Keywords: AI Ethics; Ethical Alignment; Principal-Agent Model; Contract Theory; Responsibility Allocation; Economic Incentives (search for similar items in EconPapers)
JEL-codes: D82 D86 O33 (search for similar items in EconPapers)
Date: 2024-10-01
New Economics Papers: this item is included in nep-ain, nep-cmp, nep-cta, nep-hrm and nep-mic
Note: ISSN 2039-1854
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Persistent link: https://EconPapers.repec.org/RePEc:pie:dsedps:2024/313

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