Multi-agent contract design with a budget

Understand

We study a multi-agent contract design problem with moral hazard.

• In our model, each agent exerts costly effort towards an individual task at which it may either succeed or fail, and the principal, who wishes to encourage effort, has an exclusive-use budget that it can use to reward the agents.
• A motivating application is crowdsourcing for innovation, where a fixed budget is provided to a crowdsourcing platform to use for rewarding participants based on their submissions.
• Our main contribution is to introduce a novel class of contracts, which we call Luce contracts, and show that there is always a Luce contract that is optimal.