TY - JOUR
T1 - Stochastic incentive problems with partial dynamic information and multiple levels of hierarchy
AU - Başar, Tamer
N1 - Funding Information:
*Research that led to this paper was supported from the US Department of Energy.
PY - 1989
Y1 - 1989
N2 - We formulate and solve a class of three-agent incentive decision problems with strict hierarchy and decentralized information. The agent at the top of the hierarchy (leader) observes a random linear combination of the decisions of the other two agents and constructs his policy based on this, as well as some static information. We show that for general concave utility functions, and under some reasonable conditions on the random variables involved, the leader has an optimal incentive policy which is linear in the partial dynamic measurement and which induces the desired behavior on the two followers.
AB - We formulate and solve a class of three-agent incentive decision problems with strict hierarchy and decentralized information. The agent at the top of the hierarchy (leader) observes a random linear combination of the decisions of the other two agents and constructs his policy based on this, as well as some static information. We show that for general concave utility functions, and under some reasonable conditions on the random variables involved, the leader has an optimal incentive policy which is linear in the partial dynamic measurement and which induces the desired behavior on the two followers.
UR - http://www.scopus.com/inward/record.url?scp=45249129697&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=45249129697&partnerID=8YFLogxK
U2 - 10.1016/0176-2680(89)90045-1
DO - 10.1016/0176-2680(89)90045-1
M3 - Article
AN - SCOPUS:45249129697
SN - 0176-2680
VL - 5
SP - 203
EP - 217
JO - European Journal of Political Economy
JF - European Journal of Political Economy
IS - 2-3
ER -