On Supermodular Contracts and Dense Subgraphs

TL;DR

This paper explores the combinatorial contract design problem with supermodular principal utility, providing polynomial algorithms for the single-agent case and revealing computational hardness and approximation strategies in the multi-agent setting.

Contribution

It introduces a polynomial-time algorithm for optimal contracts with supermodular utility in the single-agent case and analyzes complexity and approximation methods for the multi-agent case.

Findings

Polynomial-time algorithm for single-agent supermodular utility.

NP-hardness of approximation in multi-agent setting.

An additive PTAS for graph-based supermodular valuations.

Abstract

We study the combinatorial contract design problem, introduced and studied by Dutting et. al. (2021, 2022), in both the single and multi-agent settings. Prior work has examined the problem when the principal's utility function is submodular in the actions chosen by the agent(s). We complement this emerging literature with an examination of the problem when the principal's utility is supermodular. In the single-agent setting, we obtain a strongly polynomial time algorithm for the optimal contract. This stands in contrast to the NP-hardness of the problem with submodular principal utility due to Dutting et. al. (2021). This result has two technical components, the first of which applies beyond supermodular or submodular utilities. This result strengthens and simplifies analogous enumeration algorithms from Dutting et. al. (2021), and applies to any nondecreasing valuation function for the principal. Second, we show that supermodular valuations lead to a polynomial number of breakpoints, analogous to a similar result by Dutting et. al. (2021) for gross substitutes valuations. In the multi-agent setting, we obtain a mixed bag of positive and negative results. First, we show that it is NP-hard to obtain any finite multiplicative approximation, or an additive FPTAS. This stands in contrast to the submodular case, where efficient computation of approximately optimal contracts was shown by Dutting et. al. (2022). Second, we derive an additive PTAS for the problem in the instructive special case of graph-based supermodular valuations, and equal costs. En-route to this result, we discover an intimate connection between the multi-agent contract problem and the notorious k-densest subgraph problem. We build on and combine techniques from the literature on dense subgraph problems to obtain our additive PTAS.