Learning Optimal Contracts: How to Exploit Small Action Spaces
Francesco Bacchiocchi, Matteo Castiglioni, Alberto Marchesi, Nicola Gatti
Abstract
We study principal-agent problems in which a principal commits to an outcome-dependent payment scheme -- called contract -- in order to induce an agent to take a costly, unobservable action leading to favorable outcomes. We consider a generalization of the classical (single-round) version of the problem in which the principal interacts with the agent by committing to contracts over multiple rounds. The principal has no information about the agent, and they have to learn an optimal contract by only observing the outcome realized at each round. We focus on settings in which the size of the agent's action space is small. We design an algorithm that learns an approximately-optimal contract with high probability in a number of rounds polynomial in the size of the outcome space, when the number of actions is constant. Our algorithm solves an open problem by Zhu et al.[2022]. Moreover, it can also be employed to provide a regret bound in the related online learning setting in which the principal aims at maximizing their cumulative utility, thus considerably improving previously-known regret bounds.
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Install the CLIlune papers fulltext a5a0324a-ba9f-434e-a0c4-4956d9aa4a6dCited by top-tier papers8
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- Online Contract Design With Unknown TechnologyMatteo Bollini, Matteo Castiglioni, Alberto MarchesiICML 2026
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