- Title
- Restless Contracting
- Author(s)
- Can Urgun Can Urgun (Princeton University)
- Abstract
- I explore how a principal dynamically chooses among multiple agents to utilize for production. The principal chooses at most one agent to utilize in every period affecting the states of the agents. A utilized agent changes its state because it is utilized, but the nonutilized agents do not remain at rest: they also change their state. The analysis requires a novel methodological approach: the agency problem that the principal faces with each agent is shown to be an appropriately designed restless bandit, creating a multiarmed restless bandit. The optimal contract is characterized by an index rule for the restless bandit.
- Creation Date
- 2021-04
- Section URL ID
- Paper Number
- 2021-88
- URL
- https://scholar.princeton.edu/sites/default/files/curgun/files/6bssyxyr_restlesscontractsgeneralmodelv1_edited_final.pdf
- File Function
- Jel
- D21, D86, L14, L24
- Keyword(s)
- Relational Contracts, Restless Bandits, Dynamic Contracting
- Suppress
- false
- Series
- 13