Asking the right question: Risk and expectation in multiagent contracting

Abstract

In this paper we are interested in the decision problem faced by an agent when requesting bids for collections of tasks with complex time constraints and interdependencies. In particular, we study the problem of specifying an appropriate schedule for the tasks in the request for bids. We expect bids to require resource commitments, so we expect different settings of time windows to solicit different bids and different costs. The agent is interested in soliciting “desirable” bids, where desirable means bids that can be feasibly combined in a low-cost combination that covers the entire collection of tasks. Since the request for bids has to be issued before the agent can see any bids, in this decision process there is a probability of loss as well as a probability of gain. This requires the decision process to deal with the risk posture of the person or organization on whose behalf the agent is acting. We describe a model based on Expected Utility Theory and show how an agent can attempt to maximize its profits while managing its financial risk exposure. We illustrate the operation and properties of the model and discuss what assumptions are required for its successful integration in multiagent contracting applications.