We use the duality in linear programming to solve the problem of optimal contracts with moral hazards. We show the importance of allowing the partners to throw away outputs under some contingencies. A two-step procedure is used to find the optimal contracts. The first step minimizes the loss...

Ambiguity, also called Knightian or model uncertainty, is a key feature in financial modeling. A recent paper by Maccheroni et al. (2004) characterizes investor preferences under aversion against both risk and ambiguity. Their result shows that these preferences can be numerically represented in...

In combinatorial auctions the pricing problem is of main concern since it is the means by which the auctioneer signals the result of the auction to the participants. In order for the auction to be regarded as fair among the various participants the price signals should be such that a participant...