Designing Exploration Contracts

Martin Hoefer; Conrad Schecker; Kevin Schewior

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arXiv · 2403.02317

Designing Exploration Contracts

Martin Hoefer·Conrad Schecker·Kevin Schewior

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Abstract

We study a natural application of contract design in the context of sequential exploration problems. In our principal-agent setting, a search task is delegated to an agent. The agent performs a sequential exploration of $n$ boxes, suffers the exploration cost for each inspected box, and selects the content (called the prize) of one inspected box as outcome. Agent and principal obtain an individual value based on the selected prize. To influence the search, the principal a-priori designs a contract with a non-negative payment to the agent for each potential prize. The goal of the principal is to maximize her expected reward, i.e., value minus payment. Interestingly, this natural contract scenario shares close relations with the Pandora's Box problem. We show how to compute optimal contracts for the principal in several scenarios. A popular and important subclass is that of linear contracts, and we show how to compute optimal linear contracts in polynomial time. For general contracts, we obtain optimal contracts under the standard assumption that the agent suffers cost but obtains value only from the transfers by the principal. More generally, for general contracts with non-zero agent values for outcomes we show how to compute an optimal contract in two cases: (1) when each box has only one prize with non-zero value for principal and agent, (2) for i.i.d. boxes with a single prize with positive value for the principal.

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BibTeX RIS

Martin Hoefer, Conrad Schecker, Kevin Schewior. 2024-03-04. Designing Exploration Contracts. https://arxiv.org/abs/2403.02317

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