This paper develops a theoretical framework for analyzing incentive schemes under bounded rationality. It starts from a standard principal-agent model and then superimposes an assumption of boundedly rational behavior on the part of the agent. Boundedly rational behavior is modeled as an explicit optimization procedure which combines gradient dynamics with a specific form of social learning called imitation of scope.
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Length: 33 pages Date of creation: 2001 Date of revision: Handle: RePEc:mlb:wpaper:813
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Find related papers by JEL classification: C60 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - General D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
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