I study a principal’s optimal choice of constraint for an agent participating in an auction (or auction-like allocation mechanism). I give necessary and sufficient conditions on the principal’s beliefs about the value of the item for a simple budget constraint to be the optimal contract. The results link the observed use of budget constraints to their use in models incorporating budgetconstrain...

This paper applies the theory of the soft budget constraint to explain some stylized facts regarding the outcomes and practice of international aid, including ineffectiveness, white elephants, and volatility. The soft budget constraint can also make aid counterproductive. Nonetheless, actual aid institutions may be constrained optimal responses to soft budgets and commonly suggested reforms suc...

We consider the class of max-min and min-max optimization problems subject to a global budget constraint. We undertake a systematic algorithmic and complexity-theoretic study of such problems, which we call problems design problems. Every optimization problem leads to a natural design problem. Our main result uses techniques of Freund-Schapire [FS99] from learning theory, and its generalization...

Everyone likes Porsche but few can afford it. Budget constraints always play a critical role in a customer’s decision-making. The literature disproportionally focuses on how firms can induce customer valuations toward the product, but does not address how to assess the influence of budget constraints. We study these questions in the context of a referral reward program (RRP). RRP is a prominent...