International Journal of Computing Science and Applied Mathematics-IJCSAM
Vol. 12 No. 2 (2026)

Mechanism Design: A Mathematical ProgrammingFramework for Principal-Agent Systems*

I Nyoman Sutapa (Petra Christian University)
Laksmi Prita Wardhani (Institut Teknologi Sepuluh Nopember)
Magdalena Wullur (Universitas Sam Ratulangin)
Mohammad Sukri Bin Mustapa (Universiti Tun Hussein Onn Malaysia)



Article Info

Publish Date
11 Oct 2026

Abstract

Mechanism design is often introduced as a reverseform of game-theoretic analysis because the designer startsfrom a desired objective and then constructs rules under whichstrategic agents choose outcomes consistent with that objective.This paper develops a mathematical programming frameworkfor principal-agent mechanism design under asymmetric infor-mation. The framework treats allocation and transfer rules asdecision variables and imposes incentive compatibility, individ-ual rationality, and feasibility as explicit constraints, consistentwith the optimization-based view of mechanism design. Theproposed mathematical formulation is intended to be directlyimplementable as a finite-dimensional optimization model whentypes and actions are discretized. The paper makes three con-tributions. First, it clarifies the relationship between the reversegame-theoretic interpretation and classical mechanism design,and inverse game-theoretic learning. Second, it formulates adirect-mechanism optimization model and derives its finite-typeLP and MILP specialization. Third, it discusses continuoustype spaces through finite-grid approximation and provides ageneral sensitivity interpretation for finite networks. A two-agentbinary-type example is used not as a new auction result, butas a benchmark recovery test showing that the optimizationtemplate recovers a second-price auction with a reserve pricefrom incentive and participation constraints. The framework isrelevant for systems in which incentives and outcomes must bedesigned jointly

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Journal Info

Abbrev

ijcsam

Publisher

Subject

Mathematics

Description

IJCSAM (International Journal of Computing Science and Applied Mathematics) is an open access journal publishing advanced results in the fields of computations, science and applied mathematics, as mentioned explicitly in the scope of the journal. The journal is geared towards dissemination of ...