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

Dashi I. Singham, Wenbo Cai

Research output: Chapter in Book/Report/Conference proceedingConference contribution

3 Scopus citations

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.

Original languageEnglish (US)
Title of host publication2017 Winter Simulation Conference, WSC 2017
EditorsVictor Chan
PublisherInstitute of Electrical and Electronics Engineers Inc.
Pages2010-2020
Number of pages11
ISBN (Electronic)9781538634288
DOIs
StatePublished - Jun 28 2017
Event2017 Winter Simulation Conference, WSC 2017 - Las Vegas, United States
Duration: Dec 3 2017Dec 6 2017

Publication series

NameProceedings - Winter Simulation Conference
ISSN (Print)0891-7736

Other

Other2017 Winter Simulation Conference, WSC 2017
CountryUnited States
CityLas Vegas
Period12/3/1712/6/17

All Science Journal Classification (ASJC) codes

  • Software
  • Modeling and Simulation
  • Computer Science Applications

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