Simple versus Optimal Contracts
29/03/2019
This paper examines contract theory through the theoretical computer science lens, with the goal of developing novel theory to explain and justify the prevalence of relatively simple contracts, such as linear (pure commission) contracts. First, we consider the case where the principal knows only the rst moment of each action’s reward distribution, and we prove that linear contracts are guaranteed to be worstcase optimal, ranging over all reward distributions consistent with the given moments. Second, we study linear contracts from a worstcase approximation perspective, and prove several tight parameterized approximation bounds.
Joint work with Tim Roughgarden and Inbal TalgamCohen
Preprint: https://arxiv.org/abs/1808.03713
Speaker: http://paulduetting.com/
