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We consider a problem of finding optimal contracts in continuous time, when the agent’s actions are unobservable by the principal, who pays the agent with a one-time payoff at the end of the contract. We fully solve the case of quadratic cost and separable utility, for general utility functions. The optimal contract is, in general, a nonlinear function of the final outcome only, while in the previously solved cases, for exponential and linear utility functions, the optimal contract is linear in the final output value. In a specific example we compute, the first-best principal’s utility is infinite, while it becomes finite with hidden action, which is increasing in value of the output. In the second part of the paper we formulate a general mathematical theory for the problem. We apply the stochastic maximum principle to give necessary conditions for optimal contracts. Sufficient conditions are hard to establish, but we suggest a way to check sufficiency using non-convex optimization. [ABSTRACT FROM AUTHOR]

In this paper, a class of global optimization problems is considered. Corresponding to each local minimizer obtained, we introduced a new modified function and construct a corresponding optimization subproblem with one constraint. Then, by applying a local search method to the one-constraint optimization subproblem and using the local minimizer as the starting point, we obtain a better local optimal solution. This process is continued iteratively. A termination rule is obtained which can serve as stopping criterion for the iterating process. To demonstrate the efficiency of the proposed approach, numerical examples are solved. [ABSTRACT FROM AUTHOR]

We investigate the Extended Proximal Auxiliary Problem Principle (EPAPP) [A. Kaplan and R. Tichatschke, Extended Auxiliary Problem Principle using Bregman distances, Optimization 53 (2004), pp. 603-623, A. Kaplan and R. Tichatschke, Bregman functions and auxiliary problem principle, Optim. Methods Softw. 23, 1 (2008), pp. 95-107] for solving variational inequalities whose operator - here called the main operator - is the sum of a maximal monotone and a continuous operator. As usual for proximal methods using Bregman distances, Kalpan and Tichatschke required that the main operator is paramonotone. There are two main purposes of the present article. First, we establish the convergence of the EPAPP method without the use of paramonotonicity by replacing the latter assumption by other (partly rather natural) ones. An example showing that the main operator does not even have to be monotone is also given. Second, we discuss the EPAPP method with a stopping criterion of fixed-relative-error type by Solodov and Svaiter [An inexact hybrid generalized proximal point algorithm and some new results on the theory of Bregman functions, Math. Oper. Res. 25 (2000), pp. 214-230]. Kaplan and Tichatschke used a stopping criterion of summable-error type was used to admit an inexact solution of the corresponding auxiliary problems. To our knowledge, such a stopping criterion has not been applied to an extended APP yet; also in this situation, the paramonotonicity hypothesis is avoided. Independent of the stopping criterion under consideration, we admit an outer approximation of the set-valued component of the main operator. Owing to the use of Bregman-like functions to construct the symmetric components of the auxiliary operators, an interior-point effect is provided, meaning that - with a certain precaution - the auxiliary problems can be treated as unconstrained ones. [ABSTRACT FROM AUTHOR]

Sufficient conditions are derived for the controllability of nonlinear neutral evolution integrodifferential systems with infinite delay in a Banach space. The results are obtained by using the resolvent operators and the Schaefer fixed-point theorem. An example is given to illustrate the results. [ABSTRACT FROM AUTHOR]