Moral hazard can be resolved in cyclic communication network in S5n-logic

This article investigates the relationship between communication and agreement in multi-agent system, and to apply the agreement result by communication to the principal-agents model under asymmetric information. We treat the problem: How the communication process will be able to settle a moral hazard problem in the principal-agents model under asymmetric information. We shall propose a solution program for the moral hazard in the principal-agents model under communication through messages. Let us start that the agents have the knowledge structure induced from a partition relation associated with the multi-modal logic S5n. Each agent obtains the decision value of an event under his/her private information. Let us consider the situation that the agents privately communicate through messages on their decision values to each other. Then we shall show the agreement theorem that consensus on the decision values among all agents can be guaranteed. Furthermore, under certain assumptions we shall show the moral hazard can resolve in the principal-agents model when the principal and each agent will communicate their expected marginal costs: The principal sends the information on his/her expected marginal cost on each agent through message. The agent, the recipient of the message, revises her/his private information according the message, under which information she/he obtains the revised expected marginal cost for her/himself, and she/he sends the information on the revised revised expected marginal cost to the principal through message. The principal as the recipient revises his/her private information according the message, under which information she/he obtains the revised expected marginal cost for the agent as the sender, and he/she sends the agent the information on the revised expected marginal cost, and so on. Under the certain additional assumptions we show after long run communication, the limiting expected marginal cost between the principal and each agent coincid- es each other. The emphasis is on that the communication network is assumed not to be acyclic; i.e. the communication network graph may contains cycles.