A self-enforcing agreement:
A) describes an agreement in which every party involved has an incentive to abide by it, assuming that others do the same.
B) requires a contract.
C) describes the strategy that makes up a Nash equilibrium.
D) describes the strategy that makes up a Nash equilibrium and describes an agreement in which every party involved has an incentive to abide by it, assuming that others do the same.

Question

Quizplus · Accepted Answer

A self-enforcing agreement is one where all parties have an incentive to comply, assuming others do as well, which aligns with the concept of a Nash equilibrium. This means that the strategy each party chooses is the best response to the strategies chosen by others, making the agreement self-enforcing without the need for external enforcement mechanisms.

A Self-Enforcing Agreement