IR Constraints / Individually Rational Constraints <Back to Last Page>     <Full Glossary>

Definition of IR Constraints / Individually Rational Constraints: IR stands for "individually rational".

When solving a principal-agent maximization problem for a contract that meets various criteria, the IR constraints are those that require agents to prefer to sign the contract than not to. If the IR constraint were not imposed, the solution to the problem might be economically meaningless, insofar as it was a contract that met some criterion of optimality but which an agent would refuse to sign.

See also IC constraint. (Econterms)

Terms related to IR Constraints / Individually Rational Constraints:

• IC constraint

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