Finite-State Contract Theory with a Principal and a Field of Agents

René Carmona () and Peiqi Wang ()
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René Carmona: Department of Operations Research and Financial Engineering, Princeton University, Princeton, New Jersey 08544
Peiqi Wang: Department of Operations Research and Financial Engineering, Princeton University, Princeton, New Jersey 08544

Management Science, 2021, vol. 67, issue 8, 4725-4741

Abstract: We use the recently developed probabilistic analysis of mean field games with finitely many states in the weak formulation to set up a principal/agent contract theory model where the principal faces a large population of agents interacting in a mean field manner. We reduce the problem to the optimal control of dynamics of the McKean-Vlasov type, and we solve this problem explicitly for a class of models with concave rewards. The paper concludes with a numerical example demonstrating the power of the results when applied to an example of epidemic containment.

Keywords: principal agent problem; mean field game; epidemic control (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:67:y:2021:i:8:p:4725-4741

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