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- Define consideration. Can consideration be illegal for a binding contract? Can consideration be modified in a contract? Is that ethical?A buyer or seller must consider a number of risks when evaluating whether a long-term contract is necessary or even desirable. Three primary questions must be asked when developing a long-term contract and considering the risks: What is the potential for opportunism? In other words, how likely is the supplier to take advantage of the purchaser (or vice versa)? Is this the right supplier to engage in a long-term contract? C.Is there a fair distribution of risk and gains between the parties involved?[Adverse Selection] Each of the two players receives an envelope, in which there is anamount of money that is equally distributed from $0, $1, $2, ..., $100. The amounts in twoenvelopes are independent. After receiving the envelope, each individual can check exactlyhow much money is put in his/her own envelope. Then each player has the option to exchangehis/her envelope for the other individual's prize. The decisions are made simultaneously. Ifboth individuals agree to exchange, then the envelopes are exchanged; otherwise, if at leastone player chooses not to exchange, each individual keeps his/her own envelope and receivesits attached sum of money.a. Model this game as a static Bayesian game (write the normal formrepresentation) and find the Bayesian Nash equilibrium.b. Consider a new game where the probability distribution of money in eachenvelope is changed. The amount is equal to $100 with probability 90%, and is equalto each number in $0, $1, $2, ... ,$99 with probability 0.1%.…
- Decide whether that sentence is true or false? The validity of the contract completely depends on the form of contract. Contract for the benefit of a third party is a contract which is concluded by three parties and the third party shall enjoy benefits from the performance of such obligations; Time of entry into civil contract shall be the time when the offeree‘s letter of acceptance was posted In cases where a third party refuses to enjoy its benefits from a contract for the benefits of a third party, the contract shall still take effect toward the contracting parties. When the individual entering into the contract dies, such contract shall terminate, unless otherwise agreed upon by parties. When the object of the contract does not longer exist, it does not lead to the termination of the contract, unless the object of the contract is a distinctive object. A pledge of property shall take effect as from the time at which the last party signs the document of pledge of…a. Explain why the frail-type indifference curve pictured, UF, is not a valid indifference curve.b Draw your own version of this figure and label two contracts, A and B. Draw the two contracts such that:• contract A is strictly better than B, with more income in both states of the world, and• the customer with the pictured indifference curve nonetheless prefers contract B to contract A.You and a coworker are assigned a team project on which your likelihood or a promotion will be decidedon. It is now the night before the project is due and neither has yet to start it. You both want toreceive a promotion next year, but you both also want to go to your company’s holiday party that night.Each of you wants to maximize his or her own happiness (likelihood of a promotion and mingling withyour colleagues “on the company’s dime”). If you both work, you deliver an outstanding presentation.If you both go to the party, your presentation is mediocre. If one parties and the other works, yourpresentation is above average. Partying increases happiness by 25 units. Working on the project addszero units to happiness. Happiness is also affected by your chance of a promotion, which is depends on howgood your project is. An outstanding presentation gives 40 units of happiness to each of you; an aboveaverage presentation gives 30 units of happiness; a mediocre presentation gives 10 units…
- Explain well. Both subparts.asapb)Rachel’s objective is to maximize the expected profit, subject to that Emma works for Racheland Emma puts effort. However, effort level is not observable. Hence, Rachel needs to writea contract based on the observables. Let’s say, Rachel pays Emma based on the outcome: xLwhen the profit is $0, xM when the profit is $2000, and xH when the profit is $3,000. ThenEmma has three options:(i) Not to work for Rachel(ii) Work for Rachel without effort(iii) Work for Rachel with effortFind Emma’s expected utility on each optionc)ssuming Rachel wants Emma to put effort, her objective essentially becomes to find thelowest contingent payment scheme that is just enough for Emma to work for Rachel, andgives an incentive for Emma to put effort. Formally, we can write this as:min 0.1xL + 0.3xM + 0.6xH ,subject to0.1√xL + 0.3√xM + 0.6√xH − 5 ≥ 15, (1)and0.1√xL + 0.3√xM + 0.6√xH − 5 ≥ 0.6√xL + 0.3√xM + 0.1√xH . (2)What is Constraint (1) called? What is Constraint (2) called?d) or your information, the…Mr Ali agrees to service all the air conditioners in a building that has 15 floors. He has completed the work till 12 floors only at the moment.a. The above example is an example of Executed contract. Answer as YES OR No?b. Give reason to support your answer in part a
- The HR department is trying to fill a vacantposition for a job with a small talent pool. Validapplications arrive every week or so, and theapplicants all seem to bring different levels ofexpertise. For each applicant, the HR managergathers information by trying to verify variousclaims on resumes, but some doubt about fitalways lingers when a decision to hire or not isto be made. What are the Type I and II decision error costs? Which decision error is more likely tobe discovered by the CEO? How does this affectthe HR manager’s hiring decisions?Consider a setting in which player 1 moves first by choosing among threeactions: a, b, and c. After observing the choice of player 1, player 2 choosesamong two actions: x and y. Consider the following three variants as towhat player 3 can do and what she knows when she moves:a. If player 1 chose a, then player 3 selects among two actions: high andlow. Player 3 knows player 2’s choice when she moves. Write down theextensive form of this setting. (You can ignore payoffs.)b. If player 1 chose a, then player 3 selects among two actions: high andlow. Player 3 does not know player 2’s choice when she moves. Writedown the extensive form of this setting. (You can ignore payoffs.)c. If player 1 chose either a or b, then player 3 selects among two actions: high and low. Player 3 observes the choice of player 2, but not that of player 1. Write down the extensive form of this setting.(You can ignore payoffs.)Suppose that a large discount retailer with a lot of purchasingpower in a supply chain requires that all suppliers incorpo-rate a new information system that will reduce the cost of placing orders between the retailer and its suppliers as wellas between the suppliers and their suppliers. Suppose alsothat order quantities and lead times are related; the smallerthe order quantity the shorter the lead time from suppliers.Assume that all members of the supply chain use a continu-ous review system and EOQ order quantities. Explain the im-plications of the new information system for the supply chainin general and the inventory systems of the supply chainmembers in particular