Suppose the principal offers to share a percentage of the profit with the agent. Such a contract
A) will yield the same income for the agent as a hire contract would.
B) is incentive compatible.
C) creates a production inefficiency.
D) would not be acceptable to any agent.
B
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If firms execute a strategy that triggers a permanent punishment, the result in an indefinitely repeated game is
A) undefined. B) the non-cooperative Nash equilibrium. C) the collusive Nash equilibrium. D) economically inefficient.
Terry wants to sell his car and the lowest price he is willing to accept is $3,000 . Alice likes the car and is willing to pay at most $4,000 for it. They begin to negotiate to arrive at a price. Which of the following statements will be true?
a. They are playing a zero-sum game. b. The higher the price they agree on, the greater the benefit to both. c. The longer they take to arrive at an agreed price, the lower the benefit to them. d. They are playing a positive-sum game where their benefits add up to $1,000.