1. A main purpose of capital rationing is to control and reduce agency costs in the process of capital budgeting. Explain agency costs in the context of capital budgeting and how capital rationing can help to reduce and control these costs.

2. Discuss the trade-offs between more competition among parts of an organization as a consequence of capital rationing and the perceived benefits of capital rationing.

3. What are possible reasons to apply capital rationing in highly heterogeneous organizations and highly homogeneous organizations?

4. Research on the effects of capital rationing is relatively scarce. Different streams of literature provide different results about the effects of competition on reporting behavior of managers. Explain the different streams of the literature.