Multiple Choice Quiz

Select the radio button corresponding to your choice of answer for each question, and then click on "Submit Answers" to find out how many you answered correctly.

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.
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.
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.
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.
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.
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.
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.
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.
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.
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.