Question

How to make a vote incentive compatible?

Answer 1

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Abstract :

A mechanism is called incentive-compatible (IC) if every participant can achieve the best outcome to themselves just by acting according to their true preferences. It means that there is a Bayesian Nash equilibrium in which all participants reveal their true preferences.

Incentive compatibility is important in interactions in which at least one participant does not know perfectly what another participant knows or does. ... The incentive compatibility constraint ensures that the employees are motivated to act in the owner's interest.

Interpretation / Method

• The stronger degree is dominant-strategy incentive-compatibility (DSIC).It means that truth-telling is a weakly-dominant strategy, i.e. you fare best or at least not worse by being truthful, regardless of what the others do. In a DSIC mechanism, strategic considerations cannot help any agent achieve better outcomes than the truth; hence, such mechanisms are also called strategyproofor truthful.

• A weaker degree is Bayesian-Nash incentive-compatibility (BNIC).It means that there is a Bayesian Nash equilibrium in which all participants reveal their true preferences. I.e, if all the others act truthfully, then it is also best or at least not worse for you to be truthful.

Every DSIC mechanism is also BNIC, but a BNIC mechanism may exist even if no DSIC mechanism exists.

Typical examples of DSIC mechanisms are majority voting between two alternatives, and second-price auction.

Typical examples of a mechanisms that are not DSIC are plurality voting between three or more alternatives and first-price auction

Example

An example is when a manager hires friends to do contract work instead of bidding contracts out and choosing the lowest bid, even if the manager's salary is tied to cost reductions

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