With the explosive growth of internet activity, there will be an increasing reliance on intelligent software agents for electronic commerce and information retrieval. Such multi-agents systems will be comprised of self-motivated agents that interact with each other though negotiation and task delegation. Multi-agent technology models and facilitates these interactions through automated contracting. We develop a domain independent computational model to study in a uniform manner many complex issues that arise in multi-agent contracting, such as modeling commitment flexibility in a contract, valuing a contract under assumptions of uncertainty, risk reduction, making decisions in situations of asymmetric information, or situations of sequential subcontracting where each agent must decide to subcontract part of its current contract to others. Our model is based on financial option pricing theory. We believe that modeling contracts as options provides a natural unified framework for taking into account contracting flexibility and complex forms of environmental uncertainty. In addition, option pricing provides a computationally tractable formalism for calculating optimal values of various contracting decision parameters, that to date have not been rigorously modeled. Such parameters include the value of a flexible/contingent contract, when to give out a contract to a contractee, when to break a contract, and which contract to accept out of a set of offered contracts. Under our model these aspects of contracting can be explored analytically and experimentally. Moreover, there are some aspects of contracting that have no analogues in financial options. These include contract quality guarantees and multiple sequential sub-contracting. We extend option pricing theory in interesting ways to model such contracts.

22 pages

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