Fixed wages and bonuses in agency contracts: the case of a continuous state space

In this paper, we extend the state-contingent production approach to principal–agent problems to the case where the state space is an atomless continuum. The approach is modelled on the treatment of optimal tax problems. The central observation is that, under reasonable conditions, the optimal contract may involve a fixed wage with a bonus for above-normal performance. This is analogous to the phenomenon of "bunching" at the bottom in the optimal tax literature.

A mathematical modelling technique for the analysis of the dynamics of a simple continuous EDA

This paper presents some initial attempts to mathematically model the dynamics of a continuous estimation of distribution algorithm (EDA) based on a Gaussian distribution and truncation selection. Case studies are conducted on both unimodal and multimodal problems to highlight the effectiveness of the proposed technique and explore some important properties of the EDA. With some general assumptions, we show that, for ID unimodal problems and with the (mu, lambda) scheme: (1). The behaviour of the EDA is dependent only on the general shape of the test function, rather than its specific form; (2). When initialized far from the global optimum, the EDA has a tendency to converge prematurely; (3). Given a certain selection pressure, there is a unique value for the proposed amplification parameter that could help the EDA achieve desirable performance; for ID multimodal problems: (1). The EDA could get stuck with the (mu, lambda) scheme; (2). The EDA will never get stuck with the (mu, lambda) scheme.