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Business English Exercises
 

Roscas

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Home > Teaching Business English > Business English Lessons, Advanced Level # 279
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Informal groups cannot rely on external enforcement to insure that members abide by their obligations.

Correct answer: (a) abide

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It is generally assumed that these problems are solved by social sanctions' and reputational effects.

Correct answer: (c) reputational

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Roscas are one of the most commonly found informal financial institutions in the developing world; in the absence of an external (social) sanctioning mechanism, roscas are never sustainable, even if the defecting member is excluded from all future roscas.

Correct answer: (c) defecting

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It is typically assumed that informal groups, such as roscas, rely on social sanctions to solve their enforcement problems.

Correct answer: (d) typically

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We examine this notion more carefully and distinguish between expulsion from future roscas cycles and extraneous social sanctions.

Correct answer: (c) extraneous

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We first demonstrate that theoretically expulsion in itself is never a sufficient deterrent.

Correct answer: (b) deterrent

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We then ask whether institutional features of these groups are chosen in some part to prevent members from defaulting on their responsibilities.

Correct answer: (b) defaulting

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We focus on the allocation of ranks, and we show that a random allocation of ranks, though preferred by a majority of members, tends to exacerbate the incentives to welch.

Correct answer: (a) exacerbate

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They are therefore sustainable only if the costs of social sanctions on their members are sufficiently high.

Correct answer: (a) costs

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We provide some evidence in favour of our hypothesis, since individuals who are more vulnerable to those sanctions tend to participate in roscas where the order of ranks is randomly drawn at each cycle.

Correct answer: (d) vulnerable

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Business English Practice Exercises Business English Tests — several topics are covered: office matters, job applications, computer English, money expressions, business law, operations management, retail marketing, e-commerce, accounting terms, contracts and agreements, commercial correspondence, etc.
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