Asked by Divya Patel on Apr 27, 2024

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The incentive compatibility constraint requires that incentives be consistent with a consumers budget constraint.

Incentive Compatibility

A concept in mechanism design that ensures the strategies that maximize participants' payoffs also lead to outcomes desired by the mechanism's designer.

Consumers Budget Constraint

A consumer's budget constraint represents the combination of goods and services they can afford with their income and prices.

  • Acquire knowledge about the impact of incentives on the decision-making of economic participants.
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Zybrea KnightMay 03, 2024
Final Answer :
False
Explanation :
The incentive compatibility constraint ensures that each participant's self-reported information, such as preferences or types, in a mechanism or contract, aligns with their true information to encourage honest reporting, rather than aligning with their budget constraint.