An incentive compatibility condition is one where
A)an agent must be offered at least his reservation utility in order to agree to a contract with the principal
B)an agent must offer the principal at least her reservation utility in order to induce her to write a mutually beneficial contract
C)an agent with a certain type does not have an incentive to mimic the action of another agent of different type
D)both a and b
E)both a and c

Question

Quizplus · Accepted Answer

Incentive compatibility ensures that agents reveal their true types or preferences, meaning they do not benefit from pretending to be another type.

An Incentive Compatibility Condition Is One Where