Which of the Following Reflects the Incentive Structure Confronted by a Typical

question 173

Multiple Choice

Which of the following reflects the incentive structure confronted by a typical firm in a cartel?

• A) If I alone cheat, I'm better off; if everyone cheats, I'm worse off.
• B) I can never do better for myself than by following agreed-upon cartel policies.
• C) If everyone cheats, I'm better off and so is everyone else in the cartel.
• D) If I suspect others are planning to cheat, I'll do best for myself by deciding not to cheat.

---

Definitions:

Distress Sale

A distress sale occurs when property, stocks, or other assets are sold in an urgent manner, often at a loss, because of external pressures or financial hardship.

Forced Liquidation

The rapid sale of assets by a borrower who must sell these assets because of financial distress and cannot meet an obligation with cash flow.

Measurement Date

The specific point in time at which the value of an asset or liability is determined for accounting purposes, often used in reference to financial instruments or employee stock options.

Highest Use

An appraisal concept referring to the most probable use of a property or asset that is legally permissible, physically possible, financially feasible, and maximally productive.