Principal-Agent Problem in a Fuzzy Environment

This paper studies implementation of a classical principal-agent problem in which the agents' characteristics are supposed to be unknown to the principal. It is reasonable for us to employ fuzzy variables to denote these hidden characteristics since generally they are fuzzy by nature. A fuzzy expected value model, which aims to maximize the utility function of the principal under the incentive constraints, is developed from the principal's point of view. Pontryagin maximum principle is adopted in this paper to find the optimal solutions to the fuzzy expected value model.

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