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1 | | There are various ways of resolving the prisoners dilemma by changing the game. The game belonging to the Folk theorem has changed the |
| | A) | number of players. |
| | B) | choice possibilities. |
| | C) | information structure. |
| | D) | rules of the game. |
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2 | | The result of the Folk theorem is driven by the feature that |
| | A) | firms compete. |
| | B) | current bad behavior can be punished in the future. |
| | C) | there is an information asymmetry between the parties. |
| | D) | contracts are incomplete. |
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3 | | The stability of long term relationships is, according to the Folk theorem, not determined by the |
| | A) | number of available choices. |
| | B) | history of the relationship. |
| | C) | observability of decisions. |
| | D) | costs and benefits of finishing a relationship. |
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4 | | According to the Folk theorem the impact of the availability of new information technologies on the stability of a self-enforcing contract is |
| | A) | positive, because defections will be easier to detect. |
| | B) | positive, because it reduces the discount rate. |
| | C) | negative, because it makes the future more important than the present. |
| | D) | negative, because it increases the discount rate. |
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5 | | According to the Folk theorem, when a number of subsequent transactions are bundled into one large transaction the impact on the stability of a self-enforcing contract is |
| | A) | positive, because both parties know that more is at stake. |
| | B) | positive, because trust increases in importance. |
| | C) | negative, because defection becomes more attractive. |
| | D) | negative, because the transaction becomes more complex. |
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6 | | If a formal contract covers more contingencies, the importance of relational contracts |
| | A) | increases, because the smaller remaining surplus reduces the incentive to breach. |
| | B) | increases, because the gains from opportunistic behavior are less. |
| | C) | decreases, because the penalty of breach decreases. |
| | D) | all of the above. |
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7 | | The difference between formal and real authority is that the former |
| | A) | is legal, whereas the latter is not. |
| | B) | resides at the top, while the latter can be delegated. |
| | C) | is an income right, while the latter is a decision right. |
| | D) | concerns a complete contract, while the latter is an incomplete contract. |
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8 | | From a relational contracting perspective the attractiveness of delegation is determined by the trade-off between |
| | A) | risk aversion and incentive intensity. |
| | B) | the attractiveness of the future and the past. |
| | C) | formal and real authority. |
| | D) | the search incentives and private activities of the employee. |
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9 | | The identity of the party tempted to renege on an informal agreement depends on who owns the asset, because the |
| | A) | party without the decision rights makes a promise to the party with decision rights. |
| | B) | information asymmetry depends on the structure of decision rights. |
| | C) | party with the decision rights makes a promise to the party without decision rights. |
| | D) | structure of decision rights determines the information asymmetry. |
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10 | | The incentive to renege depends on who owns the asset because it determines the |
| | A) | bargaining positions. |
| | B) | distribution of bargaining power. |
| | C) | decision rights. |
| | D) | income rights. |
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