Deep Contract Design via Discontinuous Piecewise Affine Neural Networks

Contract design involves a principal who establishes contractual agreements about payments for outcomes that arise from the actions of an agent. In this paper, we initiate the study of deep learning for the automated design of optimal contracts. We formulate this as an offline learning problem, where a deep network is used to represent the principal's expected utility as a function of the design of a contract. We introduce a novel representation: the Discontinuous ReLU (DeLU) network, which models the principal's utility as a discontinuous piecewise affine function where each piece corresponds to the agent taking a particular action. DeLU networks implicitly learn closed-form expressions for the incentive compatibility constraints of the agent and the utility maximization objective of the principal, and support parallel inference on each piece through linear programming or interior-point methods that solve for optimal contracts. We provide empirical results that demonstrate success in approximating the principal's utility function with a small number of training samples and scaling to find approximately optimal contracts on problems with a large number of actions and outcomes.