Answer to Question #195399 in Economics for Jafar suleiman

Question

1. Suppose Goil Ghana Limited. independently reduced the price of gasoline, and that this price cut was quickly matched by competitors. Could these actions be described as reflective of a cooperative game?

2. The typical CEO of a major Ghanaian Company is 56-58 years old and gets paid GHS3-5 million per year. From a game-theory perspective, explain why corporate governance experts advise that such executives be required to hold common stock worth 7-10 years of total compensation.

Answer 1

1. These actions be described as reflective game, because there was no cooperation, and the other firms just follow the reduction in price of gasoline.

2. If such executives are required to hold common stock worth 7-10 years of total compensation, then they will be interested in such managing the company, for which they can increase the value of the stocks they hold and receive the higher payoff.