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Ambiguous Contracts

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arxiv 2302.07621 v5 pith:SBVJVVVG submitted 2023-02-15 cs.GT

Paul Dütting , Michal Feldman , Daniel Peretz , Larry Samuelson This is my paper · ORCID
classification cs.GT
keywords contractsambiguousambiguitygainagentoptimalprincipalwhen
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We explore the deliberate infusion of ambiguity into the design of contracts. We show that when the agent is ambiguity-averse and hence chooses an action that maximizes their minimum utility, the principal can strictly gain from using an ambiguous contract, and this gain can be arbitrarily high. We characterize the structure of optimal ambiguous contracts, showing that ambiguity drives optimal contracts towards simplicity. We also provide a characterization of ambiguity-proof classes of contracts, where the principal cannot gain by infusing ambiguity. Finally, we show that when the agent can engage in mixed actions, the advantages of ambiguous contracts disappear.

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Cited by 1 Pith paper

Reviewed papers in the Pith corpus that reference this work. Sorted by Pith novelty score. Full citation record

  1. Linear Contracts for Supermodular Functions Based on Graphs

    cs.GT 2024-12 accept novelty 7.0 of 10

    An additive PTAS exists for linear contracts with graph-based supermodular rewards and arbitrary agent costs.

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