Select the statements that are true for the contingent renewal contract for qual

Question

Select the statements that are true for the contingent renewal contract for quality Select one or more t is renewed each period contingent on the quality of the product in the previous period. a. The contrac b. The principal is the buyer of the product while the seller is the agent. C. The principal is the seller of the product while the buyer is the agent. d. The buyer wants the quality per dollar paid to be as high as possible, and providing quality is expensive for the seller. e. The agent chooses whether or not to renew the contract.

Explanation / Answer

Option B is correct which says that the principal is the buyer while the agent is the seller as prinipal gives money to the agent which makes him the buyer and agent, the seller.

Option D is correct: The buyer wants high quality and seller provides high quality even it is expensive for the seller since the principal (buyer) has got the power over agent. The buyer can terminate the agent, therefore, the sellers provide high quality level to meet the buyer's expectations.

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