Use the Following Information for Questions

Multiple Choice

Use the following information for questions
There are three types of cars, the good G, the bad B, and the ugly U.A G car is worth $40, a B car is worth $20, and a U car is worth $15.The seller knows the precise quality of his car, but the buyer cannot distinguish the difference in the quality of a car offered for sale.There is an equal probability of a car being G, B, or U.
-Suppose the seller of type G offers a warranty of $g, the type B seller offers $b, and the type U seller offers $u if the car fails.The probability of failure is 0.1, 0.6, and 0.9 for the G, B, and U types, respectively.An incentive compatibility condition is

A) $40 - 0.4$g ≤ $20 and $20 - 0.6$b ≤ $15
B) $40 - 0.5$b ≤ $20 and $20 - 0.6$u ≤ $15
C) $40 - 0.5$g ≤ $20 and $20 - $u ≤ $15
D) $40 - 0.6$g ≤ $20 and $20 - 0.9$b ≤ $15
E) $40 - 0.5$g≤ $20 and $20 - 0.3$b ≤ $15