Which of the following is most likely to be a feature of a state-contingent contract?
A)The agent pays the principal a higher licensing fee when demand is high compared to when demand is low.
B)The agent makes the same wage regardless of demand.
C)The agent, who lives in Nevada, earns more money on out-of-state sales (e.g., sales to California or New York)than in-state sales.
D)The restaurant owner (principal)pays the waiter (agent)more when it is snowing or raining outside.

Question

Quizplus · Accepted Answer

State-contingent contracts are designed to adjust payments based on the state of the world or certain conditions. In option A, the licensing fee varies with demand, which is a state of the world, making it a state-contingent contract.

Which of the Following Is Most Likely to Be a Feature