Strategic bidding of private information for dynamic LQ networks under moral hazard

Yasuaki Wasa, Kenko Uchida

Research output: Contribution to journalConference articlepeer-review

Abstract

This paper investigates the whole system behavior caused by the influence of the agents' strategic behavior while utilizing their individual control and private information for a dynamic linear-quadratic (LQ) network in the presence of a principal-agent relationship. The principal aims at integrating agents' behavior into the socially optimal one based on private information bid by the agents. To avoid a moral hazard on agents' controls, the principal must give a reward to the agents. The reward induces the agents to choose their controls achieving the social objective under the true private information case, but the reward cannot prevent the strategic bidding of the agents' private information. Under this situation, the case is considered that all the agents minimize their net cost composed of their own private cost and the reward from the principal, which is called the strategic bidding problem under moral hazard. Then, the strategic bidding problem is formulated and the optimal design of the problem is analytically derived. Their effectiveness and limitations are also discussed through a simulation.

Original languageEnglish
Pages (from-to)6678-6684
Number of pages7
JournalIFAC-PapersOnLine
Volume53
Issue number2
DOIs
Publication statusPublished - 2020
Event21st IFAC World Congress 2020 - Berlin, Germany
Duration: 2020 Jul 122020 Jul 17

Keywords

  • Incentives
  • LQ dynamic game
  • Moral hazard
  • Principal-agent problems
  • Strategic bidding

ASJC Scopus subject areas

  • Control and Systems Engineering

Fingerprint

Dive into the research topics of 'Strategic bidding of private information for dynamic LQ networks under moral hazard'. Together they form a unique fingerprint.

Cite this