We study optimal procurement mechanisms for a financially constrained buyer subject to ex post incentive compatibility and individual rationality. In our setup, a buyer who has a fixed budget wishes to purchase a homogeneous product up to a maximum demand amount. We characterize the optimal mechanism when the budget constraint always binds and when the maximum demand constraint always binds. Wh...

This paper studies a performance-based contract in a supply triad including a manufacturer and two competing suppliers in a dynamic, uncertain, imperfect-information environment. We present a principal-agent model for managing long-term supplier relationships using a unique form of measurement and incentive scheme. We measure a supplier’s overall performance with a rating equivalent to its cont...

We use game theory and Santa Fe Artificial Stock Market, an agent-based model of an evolving stock market, to study the optimal frequency for traders to revise their market forecasting rules. We discover two things: There is a unique strategic Nash equilibrium in the game of choosing forecast revision rates, and this equilibrium is sub-optimal in the sense that traders’ earnings are not maximiz...

It is increasingly appreciated that executive control processes need to be understood in terms of motivational as well as cognitive mechanisms. The current study examined the impact of performance-contingent reward incentives (monetary bonuses) on neural activity dynamics during cued task-switching performance. Behavioral measures indicated that performance was improved and task-switch costs se...

A principal can observe both the output and input of an agent who works at a job involving multiple tasks. We provide a simple theory that explains why it may be optimal for the principal to use only output-based incentive contract, even though the principal can monitor the agent’s actions perfectly in all but one task and knows exactly which action is optimal for each task. (JEL: D82, M5, J33)

Ridesharing platforms match drivers and riders to trips, using dynamic prices to balance supply and demand. A challenge is to set prices that are appropriately smooth in space and time, in the sense that drivers will choose to accept their dispatched trips, rather than drive to another area or wait for higher prices or a better trip. We introduce the Spatio-Temporal Pricing (STP) mechanism. The...

The proliferation of highly capable mobile devices such as smartphones and tablets has significantly increased the demand for wireless access. Software defined network (SDN) at edge is viewed as one promising technology to simplify the traffic offloading process for current wireless networks. In this paper, we investigate the incentive problem in SDN-at-edge of how to motivate a third party acc...

Motivating innovation is an important concern in many incentive problems. For example, shareholders of large corporations often need to motivate managers to pursue more innovative business strategies. This paper shows that the optimal incentive scheme that motivates innovation exhibits substantial tolerance (or even reward) for early failure and reward for long-term success. Moreover, commitmen...

Imitation is widely observed in populations of decision-making agents. Using our recent convergence results for asynchronous imitation dynamics on networks, we consider how such networks can be efficiently driven to a desired equilibrium state by offering payoff incentives for using a certain strategy, either uniformly or targeted to individuals. In particular, if for each available strategy, a...

Microgrids (MGs) contain a diverse mix of energy resources to provide safe and secure power to the consumers. Batteries are utilized in MGs for further energy security assurance as well as cost minimization. In this paper, an efficient approach is introduced for simultaneous energy management and optimal battery sizing to accomplish economic MG operation. Also, demand response programs are empl...