What Is an IC Constraint?

"IC constraint" stands for "incentive compatiblity constraint". When solving a principal-agent maximization problem for a contract that meets various criteria, the IC constraints are those that require agents to prefer to act in accordance with the solution. If the IC constraint were not imposed, the solution to the problem might be economically meaningless, insofar as it produced an outcome that met some criterion of optimality but which an agent would choose not to act in accord with.

See also IR constraint. (Econterms)

Terms related to IC Constraint / Incentive Compatibility Constraint:

  • IR constraint

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