A durable relationship (such as an employment relationship) might be 'first best Select one: a

Economics Nov 04, 2020

A durable relationship (such as an employment relationship) might be 'first best Select one: a. neither party could exit the relationship at low cost O b. only in cases where both parties frequently change partners O c. both parties could exit the relationship at low cost d. one party could exit the relationship at low cost but the other could not O e. there are large numbers of potential partners

Expert Solution

Answer: a) neither party could exit the relationship at low cost

This is because if parties have shared high profits together, they are bound to share the lows together to get better. A durable relationship can only be first when both the parties enjoy the highs together and support each other in the lows. Therefore no party should leave at low cost.

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