A principle-agent problem with heterogeneous demand distributions for a carbon capture and storage system

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Authors
Cai, W.
Singham, D.I.
Subjects
Game theory
Mechanism design
Heterogeneous demands
Uncertainty
Carbon capture and storage (CCS)
Advisors
Date of Issue
2017
Date
Publisher
Elsevier
Language
Abstract
Mechanism design problems optimize contract offerings from a principal to different types of agents who have private information about their demands for a product or a service. We study the implications of uncertainty in agents’ demands on the principal’s contracts. Specifically, we consider the setting where agents’ demands follow heterogeneous distributions and the principal offers a menu of contracts stipulating quantities and transfer payments for each demand distribution. We present analytical solutions for the special case when there are two distributions each taking two discrete values, as well as a method for deriving analytical solutions from numerical solutions. We describe one application of the model in carbon capture and storage systems to demonstrate various types of optimal solutions and to obtain managerial insights.
Type
Article
Description
The article of record as published may be found at http://dx.doi.org/10.1016/j.ejor.2017.06.009
Article in Press
URI
https://hdl.handle.net/10945/55359
Series/Report No
Department
Operations Research (OR)
Organization
Naval Postgraduate School (U.S.)
Identifiers
NPS Report Number
Sponsors
National Science Foundation
Funder
Grant CMMI-1535762 (NSF)
Grant CMMI-1535831 (NSF)
Format
18 p.
Citation
W. Cai, D.I. Singham, "A principal-agent problem with heterogeneous demand distributions for a carbon capture and storage system," European Journal of Operational Research, (2017), pp. 1-18
Distribution Statement
Rights
This publication is a work of the U.S. Government as defined in Title 17, United States Code, Section 101. Copyright protection is not available for this work in the United States.
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