A self-enforcing agreement
A) In an incentive compatible agreement
B) Requires a contract
C) Is not a Nash equilibrium
D) Is not mutually agreeable

Question

Quizplus · Accepted Answer

A self-enforcing agreement is one that is incentive compatible, meaning that each party has an incentive to uphold their end of the agreement without the need for external enforcement. Therefore, choice A is correct. Choices B, C, and D are incorrect because a self-enforcing agreement does not necessarily require a contract, is a Nash equilibrium, and is mutually agreeable by definition.

A Self-Enforcing Agreement