Question 1

Appendix: A Dutch auction implies all of the following except

Accepted Answer

The answer of Appendix: A Dutch auction implies all of...

Question 2

In the following sequential marketing game,is a threat by the manufacturer (Man)not to advertise a newly updated product unless the retailer (RET)promotes it a credible threat?

Accepted Answer

The answer of In the following sequential marketing game,is a...

Question 3

Refer to Exhibit 15A-1.
Part B: What are the expected net profits to each partner under the incentives contract?

Accepted Answer

The answer of Refer to Exhibit 15A-1.
Part B: What are...

Question 4

Appendix: In comparing rules for serving a queue,last-come first-served has all of the following effects except

Accepted Answer

The answer of Appendix: In comparing rules for serving a...

Question 5

Appendix: Sealed bids can be used in multiple rounds.How is this done?

Accepted Answer

In multiple round sealed bids, using the winner's price as the reservation price for the next round can help ensure that the bids remain tethered to the actual value of the item being auctioned off. This allows for fair competition and ensures that the auction is not won by someone who is overpaying for the item.

Question 6

Appendix: An incentive-compatible revelation mechanism is

Accepted Answer

An incentive-compatible revelation mechanism is self-enforcing, meaning it is designed to encourage truthful reporting by aligning the incentives of reporting truthfully with the payoffs for doing so. It is a mechanism commonly used in game theory and mechanism design. The other choices are either irrelevant or incorrect.

Question 7

Appendix: Each partner in a simple profit-sharing contract that splits the independently verifiable sales revenue minus unobservable cost has an incentive

Accepted Answer

Each partner would try to maximize their share of the profit by maximizing their own performance and minimizing their own costs. However, in a profit-sharing contract that splits the independently verifiable sales revenue minus unobservable cost, partners would have an incentive to overstate avoidable costs, which are the costs that can be reduced or eliminated by changing business practices. This would lead to a lower profit for the partnership, and both partners would ultimately lose out on potential profits. Therefore, choice C is the best option.

Question 8

Appendix: Revenue equivalence theorem refers to equal seller revenue in which of the following pairs:

Accepted Answer

The answer of Appendix: Revenue equivalence theorem refers to equal...

Question 9

Cooperative agreements between manufacturers and retailers concerning retail promotion and manufacturer advertising are often the key to the success of new products.Analyze the following sequential product promotion game,and then predict 1)whether the product will be updated by the manufacturer (Man),2)whether the retail distributor (RET)will promote the product,and 3)whether the manufacturer will advertise the product.No explanation necessary.

Accepted Answer

The answer of Cooperative agreements between manufacturers and retailers concerning...

Question 10

Appendix: Auctions are used in place of markets when the items traded are unique (e.g.,a Ming vase or a right to drill for oil).Which of the following examples are typically sold using Vickrey auction methods?

Accepted Answer

Vickrey auctions are commonly used for selling items that are unique and have uncertain values, such as vintage postage stamps. They are not typically used for selling items that are more standardized, like houses, furnishings, or items sold in a department store with discount pricing.

Question 11

Appendix:
Refer to Exhibit 15A-1.
​
Part C: What is the expected net profit under the simple profit sharing contract,and why would the partners adopt an incentive-compatible revelation mechanism (i.e.,an optimal incentives contract)?

Accepted Answer

The answer of Appendix:
Refer to Exhibit 15A-1.
​
Part C: What is...

Question 12

Appendix: Winning an auction can be exhilarating,but it can also lead to doubt as to whether you did the right thing or not.This is called:

Accepted Answer

The doubt or regret that comes after winning an auction is commonly known as the winner's curse. This is because the winning bid may more closely reflect the bidder's overestimation of the true value of the item being auctioned, leading to doubts about whether the winning bid was a good decision or not.

Question 13

Appendix: An optimal incentives contract can induce the revelation of true costs in a partnership by

Accepted Answer

Linking revealed cost to the partner's foregone expected profits is the best choice as it aligns the incentives of both partners. This means that both partners have an interest in revealing the true costs as it affects their expected profits. In this way, the contract can induce the revelation of true costs in a partnership. By imposing penalties or offering bonus payments, the focus becomes the penalties/bonuses, and partners may still have an incentive to overstate or understate costs. Renewing the reliance relationship may not address the issue of true costs, and enlisting third-party enforcement may be costly and may not always be effective.

Question 14

What are the expected net profits to Johnson & Johnson in a pharmaceutical R&D joint venture with Amgen given the following joint profit payoffs.The joint profit payoffs are the difference between $180 and the sum of the cost realizations.Assume that the three columns are equally likely to occur,each row is equally likely to occur.Both Johnson and Johnson and Amgen can cancel the project and both will then earn $0 if the cost revelations give early warning of losses.  The figures in parentheses represent costs associated with the Low,Moderate and High cost realizations,and all figures are in millions.

Accepted Answer

The answer of What are the expected net profits to...

Question 15

Appendix: Incentive-compatible revelation mechanisms attempt to

Accepted Answer

Incentive-compatible revelation mechanisms are designed to elicit privately-held information from individuals. The mechanism should be such that it incentivizes individuals to reveal their true information (which they might otherwise choose to hide or misrepresent) without putting them at a disadvantage. It is used in various fields including economics, game theory, and auction theory. Other options (A, C, D, and E) are not relevant to the concept of incentive-compatible revelation mechanisms.

Question 16

Appendix: In Dutch auctions,the bidding

Accepted Answer

In Dutch auctions, the bidding starts with a very high price and is gradually reduced until the first person accepts the price. This differs from the ascending bid auctions typically seen in English auctions, where the price starts low and increases until the highest bidder wins.

Question 17

Appendix: The principal advantage of an open bidding system for allocating telecommunications spectrum licenses was

Accepted Answer

The principal advantage of an open bidding system is the pooling of asymmetric information by the bidders, which helps in discovering the true value of the spectrum licenses through the bidding process.

Question 18

Appendix:
If two art dealers bidding for a Picasso receive the following forecast information about the chance of a forgery which with previously unknown Picasso paintings is present 8 times in 10 historically,what is the amount by which strategic underbidding could be reduced if ten bidders were attracted to the auction?
​
​ Forecast Received: $\quad$Not a forgery, Actual Ficasso is Forecast
Forecast Accuracy: $\quad$ Prob(This Forecast/Actual Forgery) $= 0.4$
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$Prob(Forgery Forecast/Actual Forgery) $= 0.6$
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$Prob(This Forecast/Actual Ficasso $) = 0.9$
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$Prob(Forgery Forecast Actual Ficasso $) = 0.1$

Accepted Answer

The answer of Appendix:
If two art dealers bidding for a...

Question 19

Appendix: Research suggests that an auction for a private value item will yield the HIGHEST payout if:

Accepted Answer

The answer of Appendix: Research suggests that an auction for...

Quiz 15: Contracting,governance,and Organizational Form

Appendix: A Dutch auction implies all of the following except

In the following sequential marketing game,is a threat by the manufacturer (Man)not to advertise a newly updated product unless the retailer (RET)promotes it a credible threat?

Refer to Exhibit 15A-1. Part B: What are the expected net profits to each partner under the incentives contract?

Appendix: In comparing rules for serving a queue,last-come first-served has all of the following effects except

Appendix: Sealed bids can be used in multiple rounds.How is this done?

Appendix: An incentive-compatible revelation mechanism is

Appendix: Each partner in a simple profit-sharing contract that splits the independently verifiable sales revenue minus unobservable cost has an incentive

Appendix: Revenue equivalence theorem refers to equal seller revenue in which of the following pairs:

Appendix: Auctions are used in place of markets when the items traded are unique (e.g.,a Ming vase or a right to drill for oil) .Which of the following examples are typically sold using Vickrey auction methods?

Appendix: Refer to Exhibit 15A-1. Part C: What is the expected net profit under the simple profit sharing contract,and why would the partners adopt an incentive-compatible revelation mechanism (i.e.,an optimal incentives contract)?

Appendix: Winning an auction can be exhilarating,but it can also lead to doubt as to whether you did the right thing or not.This is called:

Appendix: An optimal incentives contract can induce the revelation of true costs in a partnership by

Appendix: Incentive-compatible revelation mechanisms attempt to

Appendix: In Dutch auctions,the bidding

Appendix: The principal advantage of an open bidding system for allocating telecommunications spectrum licenses was

Appendix: Research suggests that an auction for a private value item will yield the HIGHEST payout if:

Quiz 15: Contracting,governance,and Organizational Form

Appendix: A Dutch auction implies all of the following except

In the following sequential marketing game,is a threat by the manufacturer (Man)not to advertise a newly updated product unless the retailer (RET)promotes it a credible threat?

Refer to Exhibit 15A-1. Part B: What are the expected net profits to each partner under the incentives contract?

Appendix: In comparing rules for serving a queue,last-come first-served has all of the following effects except

Appendix: Sealed bids can be used in multiple rounds.How is this done?

Appendix: An incentive-compatible revelation mechanism is

Appendix: Each partner in a simple profit-sharing contract that splits the independently verifiable sales revenue minus unobservable cost has an incentive

Appendix: Revenue equivalence theorem refers to equal seller revenue in which of the following pairs:

Appendix: Auctions are used in place of markets when the items traded are unique (e.g.,a Ming vase or a right to drill for oil) .Which of the following examples are typically sold using Vickrey auction methods?

Appendix: Refer to Exhibit 15A-1. ​ Part C: What is the expected net profit under the simple profit sharing contract,and why would the partners adopt an incentive-compatible revelation mechanism (i.e.,an optimal incentives contract)?

Appendix: Winning an auction can be exhilarating,but it can also lead to doubt as to whether you did the right thing or not.This is called:

Appendix: An optimal incentives contract can induce the revelation of true costs in a partnership by

Appendix: Incentive-compatible revelation mechanisms attempt to

Appendix: In Dutch auctions,the bidding

Appendix: The principal advantage of an open bidding system for allocating telecommunications spectrum licenses was

Appendix: Research suggests that an auction for a private value item will yield the HIGHEST payout if:

Appendix: Refer to Exhibit 15A-1. Part C: What is the expected net profit under the simple profit sharing contract,and why would the partners adopt an incentive-compatible revelation mechanism (i.e.,an optimal incentives contract)?