Exit, Voice, and Loyalty

question 21

Multiple Choice

Exit, Voice, and Loyalty
Below is the Exit, Voice, and Loyalty game between the state and the citizen. Recall that E is the payoff that the citizen gets when she exits, L is the payoff that the state gets from retaining a loyal citizen, 0 is the payoff that the citizen gets from remaining loyal, and C is the cost that the citizen must pay for using voice.
Let E = 0.5, let L > 1, and let C = 0.25.

-What are the equilibrium payoffs for each player if you use these payoff values?

• A) −.25; 1 + L
• B) .5, 1
• C) .75; L
• D) .25; 1
• E) 0; 1 + L

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Definitions:

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Units of ownership interest in a corporation or financial asset, representing a portion of the shareholder's stake in the company.

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A group of elected individuals who oversee the activities and governance of a corporation, ensuring it operates in the best interests of its shareholders.

Corporate Policies

Guidelines developed by an organization to govern its actions and ensure compliance with laws, regulations, and internal rules.

Group

A collection of individuals or entities coming together for a shared purpose or to achieve a common goal.