Seminar

"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.

Robust Contracts with Exploration