Is there another incentive compatibility constraint which needs to hold for the signalling equilibrium derived above?

We showed above that in equilibrium low productivity entrepreneurs do not have the incentive to mimic the high productivity entrepreneur by self financing 𝛼∗α∗, i.e. at 𝛼∗α∗ the incentive compatibility constraint of the low productivity entrepreneurs holds.

  • Is there another incentive compatibility constraint which needs to hold for the signalling equilibrium derived above?
  • If so, write it out.
  • Does this incentive compatibility constraint actually hold in equilibrium?

Is there another incentive compatibility constraint which needs to hold for the signalling equilibrium derived above? - essaywheel.

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