Use the following to answer question:
Table 10.2
-(Table 10.2) Suppose that Honda prices the Pilot 4WD LX at $30,000 and the Pilot 4WD Touring at $40,000. Are these prices incentive-compatible?
A) No, the less price-sensitive consumer receives more consumer surplus from the LX version.
B) Yes, each consumer type receives the highest consumer surplus from buying the car designed for its group.
C) No, the highly price-sensitive consumer receives more consumer surplus from the LX version.
D) Yes, each consumer type receives the lowest consumer surplus from buying the car designed for its group.

Question

Use the following to answer question:
Table 10.2 
-(Table 10.2) Suppose that Honda prices the Pilot 4WD LX at $30,000 and the Pilot 4WD Touring at $40,000. Are these prices incentive-compatible?
A) No, the less price-sensitive consumer receives more consumer surplus from the LX version. 
B) Yes, each consumer type receives the highest consumer surplus from buying the car designed for its group. 
C) No, the highly price-sensitive consumer receives more consumer surplus from the LX version. 
D) Yes, each consumer type receives the lowest consumer surplus from buying the car designed for its group.

Quizplus · Accepted Answer

Incentive compatibility means each consumer type should receive the highest consumer surplus from the product designed for them, ensuring they choose the intended product.

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