Incentive compatibility is a condition in which individuals have the motivation to act in accordance with the rules of a mechanism or system, ensuring that truthfully revealing their private information is in their best interest. This concept is crucial for designing systems where participants are expected to make choices based on their private information, as it guarantees that those choices align with the intended outcomes. The effectiveness of various strategic interactions and mechanisms hinges on this principle, making it a foundational concept in many economic models.
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