tutorial 6 IE

Open Ended

WHAT DOES THE PRINCIPAL-AGENT PROBLEM MEAN?

Multiple Choice

What assumption is needed for the tournaments?

... then relative performance provides information about relative effort.

• 1. All agents face similar risk…

• 1. All agents have identical work preferences and motivations….

• 1. Agents have the same level of experience and knowledge…

Multiple Choice

What is an example of the standard sharecropping contracts?

• Wage labor

• Crop sharing

• Land rental

• All of the above

Multiple Choice

Next, the assumption on ''y = output'' is rejected, it changes to what?

• 1. y = performance measure

• 1. y = total contribution to firm value

Multiple Choice

In multi-task settings, it is helpful to use ... instruments to provide a balanced package of incentives?

• Singular

• Multiple

Multiple Select

Which of these statements are the 2 correct ones?

• Relational contracts: based on objective assessments. 

• Relational contracts: also based on subjective assessments.

• Formal contracts: also based on subjective measures

• Formal contracts: based on objective measures

Multiple Choice

Untrained easy job: output 10

Traind easy job: output 20

Trained difficult job: output 30

Opportunity cost of training = 15

Is the training efficient?

• Yes

• No

Multiple Choice

Untrained easy job: output 10

Traind easy job: output 20

Trained difficult job: output 30

Opportunity cost of training = 15

Is there a wage that incentivizes both the worker and the firm?

• Yes

• No

Multiple Choice

Why does Miller suggest monitoring as a solution to asymmetric information?

• Agents are tempted to lie about their background in job interviews because they possess their own information

• Agents are tempted to take risks in their performance because they have more information about their own preferences

• Agents are tempted to perform against principal’s goals because of insufficient monetary payments

Multiple Choice

What would be an application of monitoring to the example of the house chores?

• Mom checking that you’ve done the dishes when she gets home.

• Mom calling your older sibling for him/her to check that you’ve done the dishes.

• Mom asking you to send her a picture of the dishes done.

• All of the above

Multiple Choice

What is the main consequence of the introduction of a supervisor?

• Eliminates credibility from principal’s perspective

• Increases costs of monitoring

• Hinders chain of communication

Multiple Choice

What does Miller mean by “monitoring results in rule bound agents compared to incentives”?

• Their performance is mainly constrained by the goals of the principal

• Their performance is exclusively constrained by the codes of conduct

• Their performance is constrained by codes of conduct and regulations

Multiple Choice

In Frey’s paper, what is the economic rationale that leads to monitoring?

• Individuals are assumed to undertake regulations

• Individuals are assumed to be unmotivated

• Individuals are assumed to underperform

Multiple Choice

In Frey’s paper, what are the determinants of work effort?

• Wage rate and work morale

• Work morale and employer demand

• Work regulations and workplace environment

Multiple Choice

What does reciprocity mean in the context of intrinsic motivation?

• Recognition of agent’s morale by principal

• Both agent and principal having same level of work morale

• Principal paying agent according to his/her work morale

Multiple Choice

What does overjustification mean in the context of intrinsic motivation?

• Agent feeling the need to justify his/her excess morale

• Agent’s morale constrained by regulation forces

• Agent putting extra effort to get rewarded

Multiple Choice

Following Frey, what is the effect of uniform regulations?

• Less shirking > Effective workforce > More profits > Larger growth

• More shirking > Effective workforce > More profits > Rapid growth

• Less shirking > Effective workforce > Differentiation > Rapid growth