Home /  MMD Seminar: "Incentives under the Deferred Acceptance Algorithm" & "Robust Contracts with Exploration"


MMD Seminar: "Incentives under the Deferred Acceptance Algorithm" & "Robust Contracts with Exploration" November 01, 2023 (01:30 PM PDT - 03:00 PM PDT)
Parent Program:
Location: SLMath: Eisenbud Auditorium, Online/Virtual
Speaker(s) Chang Liu (The University of New South Wales), Adrian Vetta (McGill University)
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Keywords and Mathematics Subject Classification (MSC)
Primary Mathematics Subject Classification No Primary AMS MSC
Secondary Mathematics Subject Classification No Secondary AMS MSC

Robust Contracts with Exploration


"Incentives under the Deferred Acceptance Algorithm" - Adrian Vetta


"Robust Contracts with Exploration" - Chang Liu

Abstract: We study a two-period moral hazard problem; there are two agents, with identical action sets that are unknown to the principal. The principal contracts with each agent sequentially, and seeks to maximize the worst-case discounted sum of payoffs, where the worst case is over the possible action sets. The principal observes the action chosen by the first agent, and then offers a new contract to the second agent based on this knowledge, thus having the opportunity to explore in the first period. We define a suitable rule of updating and characterize the principal's optimal payoff guarantee. Following nonlinear first-period contracts, optimal second-period contracts may also be nonlinear in some cases. Nonetheless, we find that linear contracts are optimal in both periods.

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Robust Contracts with Exploration