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Maximal Procurement under a Budget

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  • Nicole Immorlica
  • Nicholas Wu
  • Brendan Lucier

Abstract

We study the problem of a principal who wants to influence an agent's observable action, subject to an ex-post budget. The agent has a private type determining their cost function. This paper endogenizes the value of the resource driving incentives, which holds no inherent value but is restricted by finite availability. We characterize the optimal mechanism, showing the emergence of a pooling region where the budget constraint binds for low-cost types. We then introduce a linear value for the transferable resource; as the principal's value increases, the mechanism demands more from agents with binding budget constraint but less from others.

Suggested Citation

  • Nicole Immorlica & Nicholas Wu & Brendan Lucier, 2024. "Maximal Procurement under a Budget," Papers 2404.15531, arXiv.org.
    • Handle: RePEc:arx:papers:2404.15531
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    References listed on IDEAS

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    1. Bengt Holmstrom, 1980. "On The Theory of Delegation," Discussion Papers 438, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    2. Manuel Amador & Kyle Bagwell & Alex Frankel, 2018. "A note on interval delegation," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 6(2), pages 239-249, October.
    3. Grossman, Sanford J & Hart, Oliver D, 1983. "An Analysis of the Principal-Agent Problem," Econometrica, Econometric Society, vol. 51(1), pages 7-45, January.
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