We study the social efficiency of contracts as economic mechanisms when multiple principals simultaneously manage a common agent. We consider an incomplete-information setting: The agent chooses an unobservable action that induces both a cost for the agent and an expected value for each principal. The sum of these terms is referred to as the resulting social welfare. The agent’s choice is incentivized by payment schemes (“contracts”) set forth by the principals, who have different private values for different stochastic outcomes of the agent’s choice. We enforce two standard properties of contracts: individual rationality a.k.a. IR (for the principals), and limited liability a.k.a. LL (for the agent).
Joint work with Ron Lavi, Elisheva Shamash, and Inbal Talgam-Cohen