Budget-Feasible Contracts

The problem of computing near-optimal contracts in combinatorial settings has recently attracted significant interest in the computer science community. Previous work has provided a rich body of structural and algorithmic insights into this problem. However, most of these results rely on the assumption that the principal has an unlimited budget for incentivizing agents, an assumption that is often unrealistic in practice. This motivates the study of the optimal contract problem under budget constraints. We study multi-agent contracts with budget constraints under both binary and combinatorial actions. For binary actions, our contribution is threefold. First, we generalize all previously known approximation guarantees on the principal's revenue to budgeted settings. Second, through the lens of budget constraints, we uncover insightful connections between the standard objective of the principal's revenue and other objectives. We identify a broad class of objectives, which we term BEST objectives, including reward, social welfare, and revenue, and show that they are all equivalent (up to a constant factor), leading to approximation guarantees for all BEST objectives. Third, we introduce the price of frugality, which quantifies the loss due to budget constraints, and establish near-tight bounds on this measure, providing deeper insights into the tradeoffs between budgets and incentives. For combinatorial actions, we establish a strong negative result. Specifically, we show that in a budgeted setting with submodular rewards, no finite approximation is possible to any BEST objective. This stands in contrast to the unbudgeted setting with submodular rewards, where a polynomial-time constant-factor approximation is known for revenue. On the positive side, for gross substitutes rewards, we recover our binary-actions results, obtaining a constant-factor approximation for all BEST objectives.

@article{feldman2025_2504.01773,
  title={ Budget-Feasible Contracts },
  author={ Michal Feldman and Yoav Gal-Tzur and Tomasz Ponitka and Maya Schlesinger },
  journal={arXiv preprint arXiv:2504.01773},
  year={ 2025 }
}