Question 1

A maximin strategy

Accepted Answer

A)  maximizes the minimum gain that can be earned. 
B)  maximizes the gain of one player, but minimizes the gain of the opponent. 
C)  minimizes the maximum gain that can be earned. 
D)  involves a random choice between two strategies, one which maximizes potential gain and one which minimizes potential loss. 
A)  maximizes the minimum gain that can be earned. 
B)  maximizes the gain of one player, but minimizes the gain of the opponent. 
C)  minimizes the maximum gain that can be earned. 
D)  involves a random choice between two strategies, one which maximizes potential gain and one which minimizes potential loss.

Question 2

There are two independent dealers for Sporto automobiles in a large city. The dealers decide to run a cooperative advertising campaign in which both dealers are listed in local newspapers ads, and they can purchase larger ads that are more likely to attract attention and generate more auto sales if the dealers commit more funds to the joint advertising budget. Is this an example of a cooperative constant-sum game?

Accepted Answer

A)  Yes, each firm can contribute zero to 100 percent of the advertising budget, so this is a constant-sum game. 
B)  Yes, all negotiated outcomes between two firms are cooperative and constant-sum situations. 
C)  No, the outcome of the advertising campaign depends on how much money the firms contribute to the campaign, so it is not constant sum. 
D)  No, the firms are independent, so their interaction cannot be cooperative. 
A)  Yes, each firm can contribute zero to 100 percent of the advertising budget, so this is a constant-sum game. 
B)  Yes, all negotiated outcomes between two firms are cooperative and constant-sum situations. 
C)  No, the outcome of the advertising campaign depends on how much money the firms contribute to the campaign, so it is not constant sum. 
D)  No, the firms are independent, so their interaction cannot be cooperative.

Question 3

Relative to a simultaneous-move situation, the loss to firm C from having to move second in the game in Scenario 13.14, would be

Accepted Answer

A)  37. 
B)  20. 
C)  12. 
D)  8. 
E)  5. 
A)  37. 
B)  20. 
C)  12. 
D)  8. 
E)  5.

Question 4

A strategy A is "dominant" for a player X if

Accepted Answer

A)  strategy A contains among its outcomes the highest possible payoff in the game. 
B)  irrespective of any of the possible strategies chosen by the other players, strategy A generates a higher payoff than any other strategy available to player X. 
C)  strategy A is the best response to every strategy of the other player. 
D)  strategy A is the best response to the best strategy of the other player. 
E)  every outcome under strategy A generates positive payoffs. 
A)  strategy A contains among its outcomes the highest possible payoff in the game. 
B)  irrespective of any of the possible strategies chosen by the other players, strategy A generates a higher payoff than any other strategy available to player X. 
C)  strategy A is the best response to every strategy of the other player. 
D)  strategy A is the best response to the best strategy of the other player. 
E)  every outcome under strategy A generates positive payoffs.

Question 5

It can be rational to play tit-for-tat in a repeated Prisoners' Dilemma game

Accepted Answer

A)  only if the game is played an infinite number of times. 
B)  if the game is played an infinite number of times, or if it is uncertain how many times it will be played. 
C)  only if the game is played a finite number of times, and that number is known by all the players in advance. 
D)  for n-1 of the n periods it will be played, if n is known in advance. 
E)  at no time; tit-for-tat is an irrational strategy in this situation. 
A)  only if the game is played an infinite number of times. 
B)  if the game is played an infinite number of times, or if it is uncertain how many times it will be played. 
C)  only if the game is played a finite number of times, and that number is known by all the players in advance. 
D)  for n-1 of the n periods it will be played, if n is known in advance. 
E)  at no time; tit-for-tat is an irrational strategy in this situation.

Question 6

Two firms in a local market compete in the manufacture of cyberwidgets. Each firm must decide if they will engage in product research to innovate their version of the cyberwidget. The pay-offs of each firm's strategy is a function of the strategy of their competitor as well. The pay-off matrix is presented below.   
Firm #2 chooses to innovate with probability 20/21. If Firm #1 does the same, what is the expected pay-off? Is this a Mixed Strategy Nash Equilibrium? Suppose, instead, that firm #2 innovates with probability 2/3. Should player #1 always innovate?

Accepted Answer

If firm #1 does the same, the expected p

Question 7

When cost and demand are stable over time in an industry, repetition of Prisoners' Dilemma situations

Accepted Answer

A)  can yield cooperative outcomes because firms can explicitly collude to set prices. 
B)  can yield cooperative outcomes even when firms do not explicitly collude to set prices. 
C)  cooperative or noncooperative outcomes may occur, but cooperation is harder than when the market is unstable. 
D)  will tend to yield noncooperative outcomes. 
E)  will always yield noncooperative outcomes. 
A)  can yield cooperative outcomes because firms can explicitly collude to set prices. 
B)  can yield cooperative outcomes even when firms do not explicitly collude to set prices. 
C)  cooperative or noncooperative outcomes may occur, but cooperation is harder than when the market is unstable. 
D)  will tend to yield noncooperative outcomes. 
E)  will always yield noncooperative outcomes.

Question 8

Which of the following are examples of cooperative games?

Accepted Answer

A)  The bargaining between a buyer and seller over the price of a car 
B)  Independent action by two firms in a market regarding advertising strategies 
C)  Independent pricing strategies by two firms in a market 
D)  Independent pricing strategies by many firms in a market 
E)  Team games (such as baseball or basketball) 
A)  The bargaining between a buyer and seller over the price of a car 
B)  Independent action by two firms in a market regarding advertising strategies 
C)  Independent pricing strategies by two firms in a market 
D)  Independent pricing strategies by many firms in a market 
E)  Team games (such as baseball or basketball)

Question 9

Scenario 13.14
Consider the game below:  
-The game in Scenario 13.14

Accepted Answer

A)  is Stackelberg if both players move at the same time; Cournot if one player moves first. 
B)  is Cournot if both players move at the same time; Stackelberg if one player moves first. 
C)  Stackelberg no matter what the timing of moves. 
D)  Cournot no matter what the timing of moves. 
E)  is neither Stackelberg nor Cournot. 
A)  is Stackelberg if both players move at the same time; Cournot if one player moves first. 
B)  is Cournot if both players move at the same time; Stackelberg if one player moves first. 
C)  Stackelberg no matter what the timing of moves. 
D)  Cournot no matter what the timing of moves. 
E)  is neither Stackelberg nor Cournot.

Question 10

Scenario 13.15
Consider the pricing game below:  
-Refer to Scenario 13.15. If the firms price simultaneously, equilibrium would be

Accepted Answer

A)  an $80 price for Simple and a $70 price for Boring. 
B)  an $80 price for Simple and a $25 price for Boring. 
C)  a $35 price for Simple and a $70 price for Boring. 
D)  a $35 price for Simple and a $25 price for Boring. 
E)  a mixed strategy equilibrium. 
A)  an $80 price for Simple and a $70 price for Boring. 
B)  an $80 price for Simple and a $25 price for Boring. 
C)  a $35 price for Simple and a $70 price for Boring. 
D)  a $35 price for Simple and a $25 price for Boring. 
E)  a mixed strategy equilibrium.

Question 11

Scenario 13.17
Consider the entry-deterrence game below. The potential entrant would have to spend some amount in sunk costs to enter the market.  
-If the game in Scenario 13.17 were to be infinitely repeated, waging a price war might be a rational strategy

Accepted Answer

A)  because there would be no short-term losses. 
B)  because the short-term losses might be outweighed by long-term gains from preventing entry. 
C)  if the potential entrant were irrational. 
D)  if the monopolist had excess capacity. 
E)  if there were no sunk costs to the potential entrant. 
A)  because there would be no short-term losses. 
B)  because the short-term losses might be outweighed by long-term gains from preventing entry. 
C)  if the potential entrant were irrational. 
D)  if the monopolist had excess capacity. 
E)  if there were no sunk costs to the potential entrant.

Question 12

A situation in which a bidder over-values an auction item and is worse off because their bid is too high is known as the:

Accepted Answer

A)  Ellsberg Paradox. 
B)  winner's curse. 
C)  Arrow Impossibility Theorem. 
D)  curse of the commons. 
A)  Ellsberg Paradox. 
B)  winner's curse. 
C)  Arrow Impossibility Theorem. 
D)  curse of the commons.

Question 13

Tony and Larry are managers of baseball teams that currently playing a game. It's late in the ballgame and Tony's team is currently winning and in the field. Tony's strategies are to bring in a right handed pitcher (RHP) or to bring in a left handed pitcher (LHP). Larry's strategies are to bring in a right handed pinch hitter (RPH) or to bring in a left handed pinch hitter (LPH). The pay-off matrix is in terms of winning (W) or losing (L) the game. Does either player have a dominant strategy? Does the game have a Nash equilibrium? What is the maximin strategy of each player in the game?

Accepted Answer

Neither player has a dominant

Question 14

Scenario 13.3
Consider the following game:  
-In the game in Scenario 13.3, the equilibrium outcome:

Accepted Answer

A)  is for Moto to offer a CD changer and Zport to offer low-profile tires. 
B)  is for Moto to offer a CD changer and Zport to offer a sun roof. 
C)  is for Moto to offer free maintenance and Zport to offer low-profile tires. 
D)  is for Moto to offer free maintenance and Zport to offer a sunroof. 
E)  does not exist in pure strategies. 
A)  is for Moto to offer a CD changer and Zport to offer low-profile tires. 
B)  is for Moto to offer a CD changer and Zport to offer a sun roof. 
C)  is for Moto to offer free maintenance and Zport to offer low-profile tires. 
D)  is for Moto to offer free maintenance and Zport to offer a sunroof. 
E)  does not exist in pure strategies.

Question 15

Which of the following situations is likely to generate noncooperative behavior in repeated games?

Accepted Answer

A)  The game is repeated a finite number of times. 
B)  There are many players in the game. 
C)  The payoffs can change rapidly from one game period to the next. 
D)  All of these situations can generate noncooperative behavior. 
A)  The game is repeated a finite number of times. 
B)  There are many players in the game. 
C)  The payoffs can change rapidly from one game period to the next. 
D)  All of these situations can generate noncooperative behavior.

Question 16

Relative to a simultaneous-move situation, the gain to firm R from being able to move first in the game in Scenario 13.14, would be

Accepted Answer

A)  40. 
B)  37. 
C)  32. 
D)  5. 
E)  3. 
A)  40. 
B)  37. 
C)  32. 
D)  5. 
E)  3.

Question 17

If Simple were able to move first in a sequential version of the game in Scenario 13.15, the equilibrium would be

Accepted Answer

A)  an $80 price for Simple and a $70 price for Boring. 
B)  an $80 price for Simple and a $25 price for Boring. 
C)  a $35 price for Simple and a $70 price for Boring. 
D)  a $35 price for Simple and a $25 price for Boring. 
E)  a mixed strategy equilibrium. 
A)  an $80 price for Simple and a $70 price for Boring. 
B)  an $80 price for Simple and a $25 price for Boring. 
C)  a $35 price for Simple and a $70 price for Boring. 
D)  a $35 price for Simple and a $25 price for Boring. 
E)  a mixed strategy equilibrium.

Question 18

The Matching Pennies game is an example of a:

Accepted Answer

A)  constant-sum game. 
B)  nonconstant sum game. 
C)  game with an equilibrium in dominant strategies. 
D)  none of the above 
A)  constant-sum game. 
B)  nonconstant sum game. 
C)  game with an equilibrium in dominant strategies. 
D)  none of the above

Question 19

If Boring were able to move first in a sequential version of the game in Scenario 13.15, the equilibrium would be

Accepted Answer

A)  an $80 price for Simple and a $70 price for Boring. 
B)  an $80 price for Simple and a $25 price for Boring. 
C)  a $35 price for Simple and a $70 price for Boring. 
D)  a $35 price for Simple and a $25 price for Boring. 
E)  a mixed strategy equilibrium. 
A)  an $80 price for Simple and a $70 price for Boring. 
B)  an $80 price for Simple and a $25 price for Boring. 
C)  a $35 price for Simple and a $70 price for Boring. 
D)  a $35 price for Simple and a $25 price for Boring. 
E)  a mixed strategy equilibrium.

Question 20

Which of the below outcomes is the result of a Nash equilibrium in pure strategies for the game in Scenario 13.10?

Accepted Answer

A)  -5, 5 
B)  10, -10 
C)  8, -8 
D)  0, 0 
E)  There is no pure strategy equilibrium in this game. 
A)  -5, 5 
B)  10, -10 
C)  8, -8 
D)  0, 0 
E)  There is no pure strategy equilibrium in this game.

A maximin strategy

Relative to a simultaneous-move situation, the loss to firm C from having to move second in the game in Scenario 13.14, would be

A strategy A is "dominant" for a player X if

It can be rational to play tit-for-tat in a repeated Prisoners' Dilemma game

When cost and demand are stable over time in an industry, repetition of Prisoners' Dilemma situations

Which of the following are examples of cooperative games?

Scenario 13.14 Consider the game below: -The game in Scenario 13.14

Scenario 13.15 Consider the pricing game below: -Refer to Scenario 13.15. If the firms price simultaneously, equilibrium would be

Scenario 13.17 Consider the entry-deterrence game below. The potential entrant would have to spend some amount in sunk costs to enter the market. -If the game in Scenario 13.17 were to be infinitely repeated, waging a price war might be a rational strategy

A situation in which a bidder over-values an auction item and is worse off because their bid is too high is known as the:

Scenario 13.3 Consider the following game: -In the game in Scenario 13.3, the equilibrium outcome:

Which of the following situations is likely to generate noncooperative behavior in repeated games?

Relative to a simultaneous-move situation, the gain to firm R from being able to move first in the game in Scenario 13.14, would be

If Simple were able to move first in a sequential version of the game in Scenario 13.15, the equilibrium would be

The Matching Pennies game is an example of a:

If Boring were able to move first in a sequential version of the game in Scenario 13.15, the equilibrium would be

Which of the below outcomes is the result of a Nash equilibrium in pure strategies for the game in Scenario 13.10?

Preliminaries

The Basics of Supply and Demand

Consumer Behavior

Individual and Market Demand

Uncertainty and Consumer Behavior

Production

The Cost of Production

Profit Maximization and Competitive Supply

The Analysis of Competitive Markets

Market Power: Monopoly and Monopsony

Pricing With Market Power

Monopolistic Competition and Oligopoly

Markets for Factor Inputs

Investment, Time, and Capital Markets

General Equilibrium and Economic Efficiency

Markets With Asymmetric Information

Externalities and Public Goods

Filters

Exam 13: Game Theory and Competitive Strategy

A maximin strategy

Relative to a simultaneous-move situation, the loss to firm C from having to move second in the game in Scenario 13.14, would be

A strategy A is "dominant" for a player X if

It can be rational to play tit-for-tat in a repeated Prisoners' Dilemma game

When cost and demand are stable over time in an industry, repetition of Prisoners' Dilemma situations

Which of the following are examples of cooperative games?

Scenario 13.14 Consider the game below: -The game in Scenario 13.14

Scenario 13.15 Consider the pricing game below: -Refer to Scenario 13.15. If the firms price simultaneously, equilibrium would be

Scenario 13.17 Consider the entry-deterrence game below. The potential entrant would have to spend some amount in sunk costs to enter the market. -If the game in Scenario 13.17 were to be infinitely repeated, waging a price war might be a rational strategy

A situation in which a bidder over-values an auction item and is worse off because their bid is too high is known as the:

Scenario 13.3 Consider the following game: -In the game in Scenario 13.3, the equilibrium outcome:

Which of the following situations is likely to generate noncooperative behavior in repeated games?

Relative to a simultaneous-move situation, the gain to firm R from being able to move first in the game in Scenario 13.14, would be

If Simple were able to move first in a sequential version of the game in Scenario 13.15, the equilibrium would be

The Matching Pennies game is an example of a:

If Boring were able to move first in a sequential version of the game in Scenario 13.15, the equilibrium would be

Which of the below outcomes is the result of a Nash equilibrium in pure strategies for the game in Scenario 13.10?

Preliminaries

The Basics of Supply and Demand

Consumer Behavior

Individual and Market Demand

Uncertainty and Consumer Behavior

Production

The Cost of Production

Profit Maximization and Competitive Supply

The Analysis of Competitive Markets

Market Power: Monopoly and Monopsony

Pricing With Market Power

Monopolistic Competition and Oligopoly

Markets for Factor Inputs

Investment, Time, and Capital Markets

General Equilibrium and Economic Efficiency

Markets With Asymmetric Information

Externalities and Public Goods

Filters