Pricing mechanisms for cost reduction under budget constraints

The problem of evaluating the prices (cost) of individual projects of a megaproject or program is considered. The megaproject manager evaluates the cost of each project based on its planned cost reported by the project executors under the budget constraint on the total cost of the program. The executor of each project is a monopolist in the relevant area and cannot be replaced by another executor. In the deterministic case, the executors know the exact actual cost of their project; the manipulability of the mechanism for forming the cost of projects is investigated. In the stochastic case, the executors do not know the actual cost of their projects; when evaluating the planned cost, they estimate a probable value of the actual cost. For this estimate, the distribution function of the project's actual cost is used. The paper proposes a pricing mechanism for cost reduction under the budget constraint on the total cost of the program and a given probability distribution of the project's actual cost.