Framework Of Contract Theory Research Articles

Contraction-based model predictive control for stochastic nonlinear discrete-time systems with time-varying delays via multi-dimensional Taylor network

For stochastic nonlinear systems with time-varying delays, the existing robust control approaches are unnecessarily conservative in most practical scenarios. Within this context, a mathematically rigorous and computationally tractable tube-based model predictive control scheme is proposed in the framework of contraction theory. A contraction metric is systematically constructed via convex optimization by forming a differential LyapunovKrasovskii function on tangent space. It guarantees the perturbed actual solution trajectories to be contained within a robust positive invariant tube centered along the reference trajectories and results in an explicit exponential bound on the deviation. The application scenarios of the control contraction metric controller are extended from constant delay systems into time-varying delay systems thereby. Compared with the existing robust mechanism for time-delay systems based on min-max optimization formulation with a linear feedback controller, the proposed scheme greatly reduces the design conservativeness and yields a larger region of attraction. A sparse multi-dimensional Taylor network (MTN) is designed to parameterize the family of the geodesic. Compared to conventional NNs and MTN surrogates, sparse MTN features a more concise topology that enhances its computational efficiency conspicuously. Results of the numerical simulations verify the effectiveness of the proposed method.

Incentive Mechanism Design for Two-Layer Wireless Edge Caching Networks Using Contract Theory

Wireless caching technologies have been proposed to relieve the transmission pressures, especially, the transmission redundancy on back-haul channels. In this paper, we consider a two-layer caching network, consisting of traditional macro-cell base station (MBS) aided back-haul channels and small-cell base stations (SBSs) aided local links. The network service provider (NSP), who is in charge of the two layers, leases its resources of the secondary layer, i.e., coverage of the SBSs, to content providers (CPs) for making extra profits and releasing pressures on the back-haul channels. At the same time, CPs will evaluate whether they are provided with proper incentives to pre-cache their files in the SBSs. Considering different quality of services (QoS) provided by the two layers as well as the economical impact of the traditional layer on the secondary layer, the NSP designs the optimal incentive mechanisms within the framework of contract theory for maximizing its own profits. First, we formulate the utility of the NSP and CPs. Then, the minimum transmission requirement, reserve price and limited resources are considered as constraints in designing the optimal contract. Also, some important properties of these constraints are analyzed to facilitate the optimal contract determination process. At last, an optimal contract determination scheme is proposed, based on which the optimal coverage set is determined first, and then the corresponding optimal prices are derived with the aid of equal cost line. Numerical results are provided to demonstrate the effectiveness of the proposed optimal contract in increasing the NSP's profits and incentivizing CPs to transmit on the secondary layer.

Contract-Theoretic Pricing for Security Deposits in Sharded Blockchain With Internet of Things (IoT)

A sharded blockchain with the Proof-of-Stake (PoS) consensus protocol has advantages in increasing throughput and reducing energy consumption, enabling the resource-limited participants to manage transactions and in a decentralized way and obtain rewards at a lower cost, e.g., Internet-of-Things (IoT) users. However, the latest PoS (e.g., Casper) requires a steep security deposit, which is the key to provide more robust security guarantees than Proof of Work, but not practical for the owners of heterogeneous IoT devices. This article considers any individual and institute who owns the IoT devices as the potential participant and focuses on designing the proper security deposits in a practical scenario with hidden information and hidden action. To bridge blockchain and the IoT users, we study the problem of balancing the security incentive and the economic incentive under two cases: 1) stake oriented and 2) effort oriented. We propose two joint models under the contract theory framework to efficiently address the problems: 1) joint adverse selection and moral hazard and 2) joint adverse selection and tournament. Both optimal contracts can provide a maximized profit for blockchain. The optimal rewards and security deposits for different types of participants can be determined accordingly. Simulations indicate that the proposed models can overcome asymmetric information and offer feasible contracts. Moreover, it demonstrates that both joint models can provide an economic incentive for the participants without reducing security incentives for the sharded blockchain.

A Contract Theory Approach to Islamic Financial Securities with an Application to Diminishing Mushārakah

This paper demonstrates how the contract theory framework can and should complement standard financial mathematics for analysing Islamic financial securities (IFSs). It is motivated by the perception that most valuations of IFSs are rather simplistic and are as simple as risk and reward, leading to very simplistic investment strategies, especially by buyers. In fact, there are more dimensions to IFSs and IF in general which can only be properly analysed with more advanced approaches, such as contractual issues which are well-recognised and discussed in the fields of Islamic commercial law and contract theory but not always considered in valuation models. Contract theory can bring together financial mathematics and contractual issues, providing a more sophisticated framework for analysing IFSs. This paper aims to demonstrate this by providing a brief outline of the contract theory approach, followed by a simple demonstration of its use in the analysis of diminishing mushārakah (DM) contracts. The resulting model led to three main conclusions regarding DM contracts: That (i) finance seekers have no ready incentive to spend on asset maintenance, (ii) finance seekers will only spend on asset maintenance if their marginal benefit from the asset’s appreciation is greater than the financier’s share of the asset, and (iii) if the magnitude of asset appreciation and depreciation is equal, an increase in either will also increase the optimal level of spending on asset maintenance.

Predictive Deployment of UAV Base Stations in Wireless Networks: Machine Learning Meets Contract Theory

In this paper, a novel framework is proposed to enable a predictive deployment of unmanned aerial vehicles (UAVs) as temporary base stations (BSs) to complement ground cellular systems in face of downlink traffic overload. First, a novel learning approach, based on the weighted expectation maximization (WEM) algorithm, is proposed to estimate the user distribution and the downlink traffic demand. Next, to guarantee a truthful information exchange between the BS and UAVs, using the framework of contract theory, an offload contract is developed, and the sufficient and necessary conditions for having a feasible contract are analytically derived. Subsequently, an optimization problem is formulated to deploy an optimal UAV onto the hotspot area in a way that the utility of the overloaded BS is maximized. Simulation results show that the proposed WEM approach yields a prediction error of around 10%. Compared with the expectation maximization and k-mean approaches, the WEM method shows a significant advantage on the prediction accuracy, as the traffic load in the cellular system becomes spatially uneven. Furthermore, compared with two event-driven deployment schemes based on the closest-distance and maximal-energy metrics, the proposed predictive approach enables UAV operators to provide efficient communication service for hotspot users in terms of the downlink capacity, energy consumption and service delay. Simulation results also show that the proposed method significantly improves the revenues of both the BS and UAV networks, compared with two baseline schemes.

Does asset redeployability affect corporate investment and equity value?

We explain the effect of asset redeployability on corporate investment and equity value in the framework of contract theory with asymmetric information. Our theoretical study suggests that asset redeployability tends to enhance a financially-constrained firm’s investment level, investment-cash flow sensitivity and equity value, but does not have such effects on an unconstrained firm. Empirically, we use 2318 Chinese listed companies as sample over the period 2008–2014 and find evidence confirming theoretical predictions. Our findings demonstrate that asset redeployability is important in determining the corporate investment and equity value of constrained firms, thus managers should be aware of the asset characteristics and liquidation values when making asset transactions.

Pricing analysis of interconnected markets of housing, mortgage lending and insurance

Purpose This paper aims to investigate the problem of searching for the equilibrium in the housing market, the mortgage lending market and the insurance market in the process of selling the residential property. Three classes of markets are established in three modes, which reflect the interdependence of the firms’ interests in these markets through the parameters of their integration. The paper aims to determine the prices in these markets on the basis of the compromises among the conflicting interests of the related firms, and, in addition, to assess the rationality of integration for firms, which are participants in the process of selling the residential property. Design/methodology/approach On the basis of the revenue sharing contracts and the supply chain coordination methods, the optimization models of the housing realtor, the mortgage bank and the insurance company are developed. The models consider the interdependence of the firms’ interests, the monopolistic competition in these markets and the conditions of the firms’ individual rationality in the interaction process. Findings The results of the study are as follows. First, as a consequence of a decrease in the demand curves in monopolistic competition, the housing market, the mortgage market and the insurance market are interconnected, therefore, the optimization models of the firms in these markets are interdependent through the revenue sharing parameters. Second, in these markets the individual firms’ sales optimums are not identical, therefore, the interests of the firms are contradictory. Third, in the realtor-bank-insurer system, the equilibrium satisfies the condition of zero revenue sharing payments between the agents; additionally, the equilibrium prices in these markets are mutually independent. Fourth, in the disequilibrium, the prices in these markets are interrelated, i.e. the price in one market increases with the price in another market, if the payment is directed from the former to the latter, and vice versa. Research limitations/implications The results of the study are applicable in practice, if the markets demonstrate the decreasing demand curves and if the needs of buyers in related markets are interconnected. Practical implications The interaction between the realtor and the mortgage bank enables the realtor to raise its sales and the bank to increase in the number of loans, i.e. it leads to growth of their profits. The interaction between the insurer and the mortgage bank enables the insurer to increase in the number of policies and the bank to reduce the risk of lending, i.e. it leads to an increase in their profits. The identification of the individual firms’ sales optimums enables agents to determine the terms of the contracts of these interactions, which are compromises from the positions of each transaction participants. In addition, the firms’ optimums indicate the predictions of the equilibrium market prices. Originality/value In comparison with the studies in the contract theory framework, first, the mathematical description of the complicated (three-agent) system of interactions is proposed; second, the optimal choice non-linear models are developed, which take into account the non-linear demand functions in the monopolistic competition markets; third, the equilibrium of the agents with contradictory interests is investigated. In the later item, the authors establish that the revenue sharing contracts in the complimentary demands functions systems do not require the payments between the participants. Fourth, the authors prove that, in the equilibrium of these markets, the housing prices, the mortgage interest rates and the insurance rates are mutually independent and equal to the prices in the isolated markets.

Contract-Based Scheduling of URLLC Packets in Incumbent EMBB Traffic

Recently, the coexistence of ultra-reliable and low-latency communication (URLLC) and enhanced mobile broadband (eMBB) services on the same licensed spectrum has gained a lot of attention from both academia and industry. However, the coexistence of these services is not trivial due to the diverse multiple access protocols, contrasting frame distributions in the existing network, and the distinct quality of service requirements posed by these services. Therefore, such coexistence drives towards a challenging resource scheduling problem. To address this problem, in this paper, we first investigate the possibilities of scheduling URLLC packets in incumbent eMBB traffic. In this regard, we formulate an optimization problem for coexistence by dynamically adopting a superposition or puncturing scheme. In particular, the aim is to provide spectrum access to the URLLC users while reducing the intervention on incumbent eMBB users. Next, we apply the one-to-one matching game to find stable URLLC-eMBB pairs that can coexist on the same spectrum. Then, we apply the contract theory framework to design contracts for URLLC users to adopt the superposition scheme. Simulation results reveal that the proposed contract-based scheduling scheme achieves up to 63% of the eMBB rate for the “No URLLC” case compared to the “Puncturing” scheme.

Contract-Based Incentive Mechanism for LTE Over Unlicensed Channels

In this paper, a novel economic approach, based on the framework of contract theory, is proposed for providing incentives for LTE over unlicensed channels (LTE-U) in cellular networks. In this model, a mobile network operator (MNO) designs and offers a set of contracts to the users to motivate them to accept being served over the unlicensed bands. A practical model in which the information about the quality-of-service (QoS) required by every user is not known to the MNO and other users is considered. For this contractual model, the closed-form expression of the price charged by the MNO for every user is derived and the problem of spectrum allocation is formulated as a matching game with incomplete information. For the matching problem, a distributed algorithm is proposed to assign the users to the licensed and unlicensed spectra. The simulation results show that the proposed pricing mechanism can increase the fraction of users that achieve their QoS requirements by up to 45% compared to classical algorithms that do not account for users requirements. Moreover, the performance of the proposed algorithm in the case of incomplete information is shown to approach the performance of the same mechanism with complete information.

Heterogeneous Computational Resource Allocation for C-RAN: A Contract-Theoretic Approach

In this work, we develop a contract theory framework to tackle the allocations of heterogeneous baseband processing units (BBUs) in cloud radio access network. We first model a monopoly market by viewing the BBUs as a kind of resource. The infrastructure provider (InP), as the monopolist, owns all the heterogeneous BBUs of different processing abilities and maintaining costs, and leases them to multiple mobile network operators (MNOs) to gain profit. The MNOs intend to rent reasonable amount of BBUs to provide services to their mobile clients. Then we propose a contract theory framework, in which contract items are optimized to maximize the InP's utility. We design the optimal contracts with complete and asymmetric information on the MNOs. Our contract design achieves the near optimum solution to heterogeneous computational resource allocation even under the information asymmetric case. Our derivations indicate that the optimal contracts with asymmetric information achieve a lower utility for the InP than the ones with complete information and the utility reduction is higher when the BBUs are heterogeneous rather than homogeneous. Numerical results demonstrate the benefit of having heterogeneous BBUs relative to having homogeneous BBUs in terms of achieving a higher utility for the InP.

Contract-Based Small-Cell Caching for Data Disseminations in Ultra-Dense Cellular Networks

Evidence indicates that demands from mobile users (MU) on popular cloud content, e.g., video clips, account for a dramatic increase in data traffic over cellular networks. The repetitive downloading of hot content from cloud servers will inevitably bring a vast quantity of redundant data transmissions to networks. A strategy of distributively pre-storing popular cloud content in the memories of small-cell base stations (SBS), namely, small-cell caching, is an efficient technology for reducing the communication latency whilst mitigating the redundant data streaming substantially. In this paper, we establish a commercialized small-cell caching system consisting of a network service provider (NSP), several video providers (VP), and randomly distributed MUs. We conceive this system in the context of 5G cellular networks, where the SBSs are ultra-densely deployed with the intensity much higher than that of the MUs. In such a system, the NSP, in charge of the SBSs, wishes to lease these SBSs to the VPs for the purpose of making profits, whilst the VPs, after pushing popular videos into the rented SBSs, can provide faster local video transmissions to the MUs, thereby gaining more profits. Specifically, we first model the MUs and SBSs as two independent Poisson point processes, and develop, via stochastic geometry theory, the probability of the specific event that an MU obtains the video of its choice directly from the memory of an SBS. Then, with the help of the probability derived, we formulate the profits of both the NSP and the VPs. Next, we solve the profit maximization problem based on the framework of contract theory, where the NSP acts as a monopolist setting up the optimal contract according to the statistical information of the VPs. Incentive mechanisms are also designed to motivate each VP to choose a proper resource-price item offered by the NSP. Numerical results validate the effectiveness of our proposed contract framework for the commercial caching system.

A singular perturbation approach to saturated controller design with application to bounded stabilization of wing rock phenomenon

This paper proposes a singular perturbation-based approach to design saturated controllers for a class of nonlinear systems and shows its effectiveness in suppressing wing rock phenomenon in aircraft. Approximate dynamic inversion technique is exploited to design a high-gain dynamic controller which enforces time-scale separation in the closed-loop system. The convergence analysis of closed-loop system is done using the framework of contraction theory. Explicit tracking error bounds are derived both in the presence and absence of disturbances in system dynamics. The derived bounds are valid beyond a restrictive range of perturbation parameter, unlike Lyapunov-based approaches.

Design of Contract-Based Trading Mechanism for a Small-Cell Caching System

Recently, content-aware-enabled distributed cach- ing relying on local small-cell base stations (SBSs), namely, small-cell caching, has been intensively studied for reducing transmission latency as well as alleviating the traffic load over backhaul channels. In this paper, we consider a commercialized small-cell caching system consisting of a network service provider (NSP), several content providers (CPs), and multiple mobile users (MUs). The NSP, as a network facility monopolist in charge of the SBSs, leases its resources to the CPs for gaining profits. At the same time, the CPs are intended to rent the SBSs for providing better downloading services to the MUs. We focus on solving the profit maximization problem for the NSP within the framework of contract theory. To be specific, we first formulate the utility functions of the NSP and the CPs by modeling the MUs and SBSs as two independent Poisson point processes. Then, we develop the optimal contract problem for an information asymmetric scenario, where the NSP only knows the distribution of CPs’ popularity among the MUs. Also, we derive the necessary and sufficient conditions of feasible contracts. Lastly, the optimal contract solutions are proposed with different CPs’ popularity parameter $\gamma $ . Numerical results are provided to show the optimal quality and the optimal price designed for each CP. In addition, we find that the proposed contract-based mechanism is superior to the benchmarks from the perspective of maximizing the NSP’s profit.

Sparse Control for Dynamic Movement Primitives

This paper describes the use of spatially-sparse inputs to influence global changes in the behavior of Dynamic Movement Primitives (DMPs). The dynamics of DMPs are analyzed through the framework of contraction theory as networked hierarchies of contracting or transversely contracting systems. Within this framework, sparsely-inhibited rhythmic DMPs (SI-RDMPs) are introduced to both inhibit or enable rhythmic primitives through spatially-sparse modification of the DMP dynamics. SI-RDMPs are demonstrated in experiments to manage start-stop transitions for walking experiments with the MIT Cheetah. New analytical results on the coupling of oscillators with diverse natural frequencies are also discussed.

Contract-Based Incentive Mechanisms for Device-to-Device Communications in Cellular Networks

Device-to-device (D2D) communication is viewed as one promising technology for boosting the capacity of wireless networks and the efficiency of resource management. D2D communication heavily depends on the participation of users in sharing contents. Thus, it is imperative to introduce new incentive mechanisms to motivate such user involvement. In this paper, a contract-theoretic approach is proposed to solve the problem of providing incentives for D2D communication in cellular networks. First, using the framework of contract theory, the users' preferences toward D2D communication are classified into a finite number of types, and the service trading between the base station and users is properly modeled. Next, necessary and sufficient conditions are derived to provide incentives for users' engagement in D2D communication. Finally, our analysis is extended to the case in which there is a continuum of users. Simulation results show that the contract can effectively incentivize users' participation, and increase capacity of the cellular network than the other mechanisms.

Centralization, Decentralization and Incentive Problems in Eurozone Financial Governance: A Contract Theory Analysis

We use a Contract Theory framework to analyze the mechanisms of Eurozone Financial Governance, with a focus on centralization vs. decentralization and incentive problems. By constructing a Stackelberg game model with n Ministries of Finance as the first movers, and European Central Bank as the second mover, we show that each government can create growth in its own country (self-benefit) by increasing government spending, but it will increase inflation and the euro value will fall. Since these effects are shared equally by euro countries (cost sharing), there exists an incentive to free-ride on other countries. We then analyze a solution to the free-rider problem through the penalty scheme, and derive a second best solution where a commitment not to renegotiate penalties ex-post is impossible. Lastly, we derive the parameter conditions for optimizing the EU’s current allocation of authority, “divided authority structure,” which consists of Monetary Centralization and Fiscal Decentralization. We find that what is effective is “contingency dependent governance” based on “relative sovereignty,” where there is a division of authority as the basic structure and the main body governs with leading sovereignty depending on the contingency.

Global State Synchronization in Networks of Cyclic Feedback Systems

This technical note studies global asymptotic state synchronization in networks of identical systems. Conditions on the coupling strength required for the synchronization of nodes having a cyclic feedback structure are deduced using incremental dissipativity theory. The method takes advantage of the incremental passivity properties of the constituent subsystems of the network nodes to reformulate the synchronization problem as one of achieving incremental passivity by coupling. The method can be used in the framework of contraction theory to constructively build a contracting metric for the incremental system. The result is illustrated for a network of biochemical oscillators.

Comparison of diagnosis related groups perspective payment system(DRGs-PPS)and fee-for-services

It is the core of provider payment reform in healthcare that payment methods can be chosen correctly.According to the framework of contract theory,this paper compared the“pricing cost”and“monitoring cost”between diagnosis related groups perspective payment system(DRGs-PPS)and feefor-service.And then,based on contract theory,this paper further turn to analyzed the main management problems during the implementation of DRGs-PPS,and put forward relevant policies key points from the aspects of“monitoring”and“maintaining”.This paper drawn the basic conclusions that,comparing to feefor-services,DRG-s-PPS have relative low transaction; therefore,the transformation from fee-for-service to DRGs-PPS will benefit the virtuous circle of the healthcare market.However,DRGs-PPS is new deal for China,so it need to be pushed forward steadily with the full consideration of healthcare regulations and system maintenance. Key words: Medical services; Payment; DRGs-PPS; Fee-for-services

Rule of Law: A Comparison between Ancient Persia and Ancient Greece

The ancient Persian empires are denoted as despotic, practicing arbitrary rule while Greece, Persia's archrival during the sixth to fourth century BC, exercised rule of law. This paper uses a contract theory framework to analyze some of the geographical and environmental underpinnings of the existence of rule of law in the city-states of ancient Greece and its absence in Persia. I discuss the role of geographical conditions of land (open plains versus mountains), population pressure, proximity to the sea and form of trade (overland versus overseas) as factors conducive to rule of law in the city-states of ancient Greece and to despotism in ancient Persia. Specifically, the role of trade via land in Persia prior to the fifth century BC is compared to the role of sea trade (alongside with piracy) in ancient Greece. I argue that in ancient Persia monarchs could tax or expropriate much of the gains from overland trade, preventing the accumulation of an independent form of wealth by merchants. In Greece, sea trade alongside the practice of piracy led to gains from trade that could not be easily expropriated by the monarchs and acted as a balancing force vis-à-vis the power of the monarchs, creating a basis for rule of law in the Greek city-states.

EVA Compensation Schemes and Controllability Issues: An Empirical Investigation

This paper investigates the properties of EVAâ compensation schemes, which were considered as a major managerial innovation of the 90's. The analysis is carried on in the framework of contract theory and based on a six year longitudinal case study. It is argued that such schemes induce a loss of controllability (the bonus is influenced by factors out of the control of the managers) as compared to more traditional ones. The role of the target setting, based on external standards, and the absence of renegotiation are of particular significance in explaining this loss. This analysis may explain some of the difficulties encountered in the implementation of these schemes and their relative decline.