Mechanism design is used to
A) align the interests of two parties in a transaction.
B) give individuals the incentive to reveal the truth about themselves.
C) correct inefficiencies associated with asymmetric information.
D) All of the above are correct.

Question

Quizplus · Accepted Answer

Mechanism design is a field in economics and game theory that aims to achieve optimal outcomes in strategic settings, where players have private information. It is used to align the interests of parties in a transaction (A), incentivize individuals to reveal their true preferences or information (B), and correct for inefficiencies that arise due to asymmetric information (C). Therefore, all of the provided options are correct applications of mechanism design.

Mechanism Design Is Used to