Intelligent Machines and Incomplete Information
Sujata Goala, Mridu Prabal Goswami, Surajit Borkotokey
TL;DR
This paper addresses hiring under incomplete information when the production technology is an intelligent TAM that reveals effort and efficiency through its output. By modeling two employees as a cooperative game in characteristic form and allocating salaries via Shapley shares, it derives ex-ante Nash equilibria conditioned on the distribution of talents. The main contributions are the existence and characterization of symmetric ex-ante equilibria under super-modular production and sub-modular costs, and the analysis of strategic behavior across coalitions, including probation-like singleton scenarios. The work provides a formal link between the talent distribution and the resulting output distribution, offering a framework for AI-assisted hiring decisions in technologically advanced firms.
Abstract
The distribution of efficient individuals in the economy and the efforts that they will put in if they are hired, there are two important concerns for a technologically advanced firm. wants to open a new branch. The firm does not have information about the exact level of efficiency of an individual when she is hired. We call this situation incomplete information. The standard principal agent models assume that employees know their efficiency levels. Hence these models design incentive-compatible mechanisms. An incentive-compatible mechanism ensures that a participant does not have the incentive to misreport her efficiency level. This paper does not assume that employees know how efficient they are. This paper assumes that the production technology of the firm is intelligent, that is, the output of the machine reveals the efficiency levels of employees. Employees marginal contributions to the total output of the intelligent machine, the probability distribution of the levels of efficiency and employees costs of efforts together define a game of incomplete information. A characterization of ex-ante Nash Equilibrium is established. The results of the characterization formalize the relationship between the distribution of efficiency levels and the distribution of output.