A Note on the Multi-Agent Contracts in Continuous Time

Qi Luo and Romesh Saigal

Papers from arXiv.org

Abstract: Dynamic contracts with multiple agents is a classical decentralized decision-making problem with asymmetric information. In this paper, we extend the single-agent dynamic incentive contract model in continuous-time to a multi-agent scheme in finite horizon and allow the terminal reward to be dependent on the history of actions and incentives. We first derive a set of sufficient conditions for the existence of optimal contracts in the most general setting and conditions under which they form a Nash equilibrium. Then we show that the principal's problem can be converted to solving Hamilton-Jacobi-Bellman (HJB) equation requiring a static Nash equilibrium. Finally, we provide a framework to solve this problem by solving partial differential equations (PDE) derived from backward stochastic differential equations (BSDE).

Date: 2017-10, Revised 2017-10
New Economics Papers: this item is included in nep-cta, nep-dge and nep-mic
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