nep-cta 2020-02-17 papers

on Contract Theory and Applications

Issue of 2020‒02‒17
two papers chosen by
Guillem Roig
University of Melbourne

Optimal Dynamic Incentive Contracts between a Principal and Multiple Agents in Controlled Markov Processes: A Constructive Approach By Yasuaki Wasa; Ken-Ichi Akao; Kenko Uchida
What Aspects of Formality Do Workers Value ? Evidence from a Choice Experiment in Bangladesh By Mahmud,Minhaj; Gutierrez,Italo A.; Kumar,Krishna B.; Nataraj,Shanthi

Optimal Dynamic Incentive Contracts between a Principal and Multiple Agents in Controlled Markov Processes: A Constructive Approach

By:	Yasuaki Wasa (Department of Electrical Engineering and Bioscience, Waseda University, Tokyo 169-8555, Japan.); Ken-Ichi Akao (Graduate School of Social Sciences, Waseda University, Tokyo 169-8050, Japan.); Kenko Uchida (Research Institute for Science and Engineering, Waseda University, Tokyo 169-8555, Japan.)
Abstract:	This paper investigates an optimal dynamic incentive contract between a risk-averse principal (system operator) and multiple risk-averse agents (subsystems) with independently local controllers in continuous-time controlled Markov processes, which can represent various cyber-physical systems. The principal fs incentive design and the agents f decision-makings under asymmetric information structure are known as the principal-agent (PA) problems in economic field. However, the standard framework in economics cannot be directly applied to the realistic control systems including large-scale cyber-physical systems and complex networked systems due to some unrealistic assumptions for an engineering perspective. In this paper, using a constructive approach based on the techniques of the classical stochastic control theory, we propose and solve a novel dynamic control/incentive synthesis for the PA problem under moral hazard.
Keywords:	Principal-agent problems, Moral hazard, Cyber-physical systems, Multi-agent systems, Dynamic programming, Risk-sensitive stochastic control, Differential games
JEL:	C61 C73 D82
Date:	2020–02
URL:	http://d.repec.org/n?u=RePEc:was:dpaper:2001&r=all

What Aspects of Formality Do Workers Value ? Evidence from a Choice Experiment in Bangladesh

By:	Mahmud,Minhaj; Gutierrez,Italo A.; Kumar,Krishna B.; Nataraj,Shanthi
Abstract:	This study uses a choice experiment among 2,000 workers in Bangladesh to elicit willingness to pay (WTP) for job attributes: a contract, termination notice, working hours, paid leave, and a pension fund. Using a stated preference method allows calculation of WTP for benefits in this setting, despite the lack of data on worker transitions, and the fact that many workers are self-employed, which makes it difficult to use revealed preference methods. Workers highly value job stability: the average worker would be willing to forego a 27 percent increase in income to obtain a 1-year contract (relative to no contract), or to forego a 12 percent increase to obtain thirty days of termination notice. There is substantial heterogeneity in WTP by type of employment and gender: women value shorter working hours more than men, while government workers place a higher value on contracts than do private sector employees.
Keywords:	Labor Markets,Labor Standards,Rural Labor Markets,Educational Sciences,Employment and Unemployment,Gender and Development
Date:	2020–01–13
URL:	http://d.repec.org/n?u=RePEc:wbk:wbrwps:9108&r=all

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