Incentive compatible resource allocation in concurrent design

This article presents an approach that a manager can use to allocate resources needed to design a system among the members of a concurrent design team. The system being designed is assumed to be composed of a number of subsystems, each designed by a different engineer. These engineers possess private information about the performance of their subsystem as a function of the design resources that they are allocated. This article shows how the manager of such a concurrent design project can induce rational self-interested engineers to reveal truthfully their private subsystem performance functions. This is accomplished through an incentive contract that ties each engineer’s pay to the contribution of their subsystem to the performance of the overall system. The approach builds from a Vickrey–Clarke–Groves mechanism to achieve, as an ex-post Nash equilibrium, truthful reporting of private subsystem performance functions by risk-neutral agents.