Three difficulties that limit the usefulness of ownership in resolving incentive problems are:
A)wealth constraints,free-riding,and bundling.
B)risk aversion,free-riding,and conflict of interests.
C)wealth constraints,risk aversion,and bundling.
D)wealth constraints,risk aversion,and free-riding.

Question

Quizplus · Accepted Answer

Wealth constraints, risk aversion, and free-riding are all difficulties that limit the usefulness of ownership in resolving incentive problems. Wealth constraints refer to the inability of individuals or firms to acquire or maintain ownership due to financial constraints. Risk aversion refers to the tendency of individuals or firms to avoid taking risks, which can limit their willingness to invest in ownership. Free-riding occurs when individuals or firms benefit from the efforts of others without contributing to the effort themselves, which can undermine the incentives provided by ownership. Conflict of interests and bundling are also factors that can limit the effectiveness of ownership as an incentive mechanism, but these are not included in the answer choices.

Three Difficulties That Limit the Usefulness of Ownership in Resolving