Finite-state contract theory with a principal and a field of agents

René Carmona, Peiqi Wang

Research output: Contribution to journalArticlepeer-review

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.

Original languageEnglish (US)
Pages (from-to)4725-4741
Number of pages17
JournalManagement Science
Volume67
Issue number8
DOIs
StatePublished - Aug 2021

All Science Journal Classification (ASJC) codes

  • Strategy and Management
  • Management Science and Operations Research

Keywords

  • Epidemic control
  • Mean field game
  • Principal agent problem

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