Sample average approximations for the continuous type principal-agent problem: An example

Document Type

Conference Proceeding

Publication Date

6-28-2017

Abstract

Principal-agent problems study contracts for goods or services that a principal (seller) should offer an agent (buyer). The goal is for the principal to optimize the quantity and price in the contract offered to an agent with uncertain demand, where the principal has estimated a distribution for the agent's demand. The agent's demand distribution can be discrete or continuous. A deterministic optimization solution to the discrete distribution problem delivers a contract with price and quantity options targeted towards each possible demand realization. When the demand distribution is continuous, the optimal contract becomes a continuous function of the demand space. This paper introduces a sample average approximation to the continuous distribution problem using methods for solving the discrete distribution problem. We explore using numerical results an example motivated by carbon capture and storage systems.

Identifier

85044503519 (Scopus)

ISBN

[9781538634288]

Publication Title

Proceedings Winter Simulation Conference

External Full Text Location

https://doi.org/10.1109/WSC.2017.8247935

ISSN

08917736

First Page

2010

Last Page

2020

Grant

CMMI-1535762

Fund Ref

National Science Foundation

This document is currently not available here.

Share

COinS