Question 1

What does it mean to say that a game is in "extensive form"?

Accepted Answer

A)  Strategies are described, rather than just numbered. 
B)  All payoffs are shown. 
C)  The game is presented as a matrix. 
D)  The game is presented as a decision tree. 
E)  The game is written out as often as the situation calls for it to be played. 
A)  Strategies are described, rather than just numbered. 
B)  All payoffs are shown. 
C)  The game is presented as a matrix. 
D)  The game is presented as a decision tree. 
E)  The game is written out as often as the situation calls for it to be played.

Question 2

Refer to Scenario 13.1. At your negotiated price the producer surplus is:

Accepted Answer

A)  $0. 
B)  $50. 
C)  $200. 
D)  $250. 
E)  $300. 
A)  $0. 
B)  $50. 
C)  $200. 
D)  $250. 
E)  $300.

Question 3

Two firms at the St. Louis airport have franchises to carry passengers to and from hotels in downtown St. Louis. These two firms, Metro Limo and Urban Limo, operate nine passenger vans. These duopolists cannot compete with price, but they can compete through advertising. Their payoff matrix is below:   a. Does each firm have a dominant strategy? If so, explain and what that strategy is.
b. What is the Nash equilibrium? Explain where the Nash equilibrium occurs in the payoff matrix.

Accepted Answer

a.Metro Limo has no dominant strategy. I

Question 4

In the game in Scenario 13.14, each firm has a strategy that would not be chosen under any circumstances. This strategy is:

Accepted Answer

A)  Q = 50. 
B)  Q = 100. 
C)  Q = 150. 
D)  "choose the same Q as the other player." 
E)  "choose a Q different from the other player's." 
A)  Q = 50. 
B)  Q = 100. 
C)  Q = 150. 
D)  "choose the same Q as the other player." 
E)  "choose a Q different from the other player's."

Question 5

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 6

Two firms in a local market compete in the manufacture of cyberwidgets. Each firm must decide if it will offer a warranty or not. The payoffs of each firm's strategy are a function of their competitor as well. The payoff matrix is presented below.   If firm #1 announces they will offer a warranty regardless of what firm #2 does, is this a credible threat? Why or why not?

Accepted Answer

Both firms offering a warranty and both

Question 7

Consider the following output-choice game for two firms:   What is the outcome of the game if both firms use maximin strategies?

Accepted Answer

A)  Both firms choose low output levels. 
B)  Both firms choose medium output levels. 
C)  There is no clear outcome under a maximin strategy for both firms. 
D)  There are two possible maximin outcomes-Firm 1 chooses medium and Firm 2 chooses low, or Firm 1 chooses low and Firm 2 chooses medium. 
A)  Both firms choose low output levels. 
B)  Both firms choose medium output levels. 
C)  There is no clear outcome under a maximin strategy for both firms. 
D)  There are two possible maximin outcomes-Firm 1 chooses medium and Firm 2 chooses low, or Firm 1 chooses low and Firm 2 chooses medium.

Question 8

When, in the game in Scenario 13.14, the strategy that would not be chosen under any circumstances is removed, what is left is a:

Accepted Answer

A)  Battle of the Sexes game. 
B)  Matching Pennies game. 
C)  Prisoners' Dilemma game. 
D)  Beach Location game. 
E)  constant-sum game. 
A)  Battle of the Sexes game. 
B)  Matching Pennies game. 
C)  Prisoners' Dilemma game. 
D)  Beach Location game. 
E)  constant-sum game.

Question 9

For infinitely repeated games in which the players follow a tit-for-tat strategy, which one of the following outcomes is NOT possible?

Accepted Answer

A)  The players cooperate with one another until someone decides to not cooperate, and then the other players will not cooperate for some period of time. 
B)  There can be dominant strategies. 
C)  If the information about another player's action is limited, then some cooperative actions may be incorrectly interpreted as "not cooperate." 
D)  All of the above are possible outcomes. 
A)  The players cooperate with one another until someone decides to not cooperate, and then the other players will not cooperate for some period of time. 
B)  There can be dominant strategies. 
C)  If the information about another player's action is limited, then some cooperative actions may be incorrectly interpreted as "not cooperate." 
D)  All of the above are possible outcomes.

Question 10

Scenario 13.12
Consider the game below:  
-Playing the game in Scenario 13.12 by using a maximin strategy would:

Accepted Answer

A)  not change the equilibrium from the equilibrium of the original game. 
B)  change the equilibrium to (R1,C2). 
C)  change the equilibrium to (R2,C1) if R moved first. 
D)  change the equilibrium to (R2,C1) if C moved first. 
E)  change the equilibrium to (R2,C2). 
A)  not change the equilibrium from the equilibrium of the original game. 
B)  change the equilibrium to (R1,C2). 
C)  change the equilibrium to (R2,C1) if R moved first. 
D)  change the equilibrium to (R2,C1) if C moved first. 
E)  change the equilibrium to (R2,C2).

Question 11

Use the following statements to answer the question: I. Consider the problem of negotiating the price of a rug that costs $100 to make. If there are two buyers (one with a maximum willingness-to-pay of $200 and one with a maximum willingness-to-pay of $250), then the situation is no longer a constant sum game.
II) The likely outcome from the game described in statement I is that the second buyer will bid a price slightly above $200 to win the rug.

Accepted Answer

A)  I and II are true. 
B)  I is true and II is false. 
C)  II is true and I is false. 
D)  I and II are false. 
A)  I and II are true. 
B)  I is true and II is false. 
C)  II is true and I is false. 
D)  I and II are false.

Question 12

Scenario 13.8
Consider the following game:  
-In game in Scenario 13.8, what is the Nash equilibrium?

Accepted Answer

A)  The strategy pair associated with $1, $10. 
B)  The strategy pair associated with $2, $0. 
C)  The strategy pair associated with $1, -$5000. 
D)  The strategy pair associated with $2, $2. 
E)  There is no Nash equilibrium in pure strategies. 
A)  The strategy pair associated with $1, $10. 
B)  The strategy pair associated with $2, $0. 
C)  The strategy pair associated with $1, -$5000. 
D)  The strategy pair associated with $2, $2. 
E)  There is no Nash equilibrium in pure strategies.

Question 13

In a Nash equilibrium,

Accepted Answer

A)  each player has a dominant strategy. 
B)  no players have a dominant strategy. 
C)  at least one player has a dominant strategy. 
D)  players may or may not have dominant strategies. 
E)  the player with the dominant strategy will win. 
A)  each player has a dominant strategy. 
B)  no players have a dominant strategy. 
C)  at least one player has a dominant strategy. 
D)  players may or may not have dominant strategies. 
E)  the player with the dominant strategy will win.

Question 14

Scenario 13.9
Consider the following game:
Two firms are situated next to a lake, and it costs each firm $1,500 per period to use filters that avoid polluting the lake. However, each firm must use the lake's water in production, so it is also costly to have a polluted lake. The cost to each firm of dealing with water from a polluted lake is $1,000 times the number of polluting firms.  
-Refer to Scenario 13.9. The equilibrium of this game, if played only once, is that:

Accepted Answer

A)  both firms pollute. 
B)  only Lago pollutes. 
C)  only Nessie pollutes. 
D)  neither firm pollutes. 
E)  the firms choose a mixed strategy. 
A)  both firms pollute. 
B)  only Lago pollutes. 
C)  only Nessie pollutes. 
D)  neither firm pollutes. 
E)  the firms choose a mixed strategy.

Question 15

Joe's Imports is currently the only dealer for imported Sporto autos on the East Coast, but Fred's Autos may enter the import market and start selling Sporto cars in the East Coast market during the coming year. Joe's Imports can pay the Sporto manufacturer for exclusive East Coast marketing rights, which would deter the entry of Fred's Autos into the market. The payoffs from the possible actions are measured in millions of dollars per year, and the possible outcomes of the sequential entry game are summarized in the following matrix:   What is the equilibrium outcome from this sequential entry game?

Accepted Answer

A)  Joe's Imports buys the marketing rights, and Fred's Autos cannot enter the market. 
B)  Joe's Imports buys the marketing rights, and Fred's Autos enters the market. 
C)  Joe's Imports does not buy the marketing rights, and Fred's Autos enters the market. 
D)  Joe's Imports does not buy the marketing rights, but Fred's Autos does not enter the market. 
A)  Joe's Imports buys the marketing rights, and Fred's Autos cannot enter the market. 
B)  Joe's Imports buys the marketing rights, and Fred's Autos enters the market. 
C)  Joe's Imports does not buy the marketing rights, and Fred's Autos enters the market. 
D)  Joe's Imports does not buy the marketing rights, but Fred's Autos does not enter the market.

Question 16

Scenario 13.13
Consider the game below:  
-Playing the game in Scenario 13.13 sequentially would:

Accepted Answer

A)  not change the equilibrium. 
B)  change the equilibrium to (R1,C1). 
C)  change the equilibrium to (R2,C1) if R moved first. 
D)  change the equilibrium to (R2,C1) if C moved first. 
E)  change the equilibrium to (R2,C2). 
A)  not change the equilibrium. 
B)  change the equilibrium to (R1,C1). 
C)  change the equilibrium to (R2,C1) if R moved first. 
D)  change the equilibrium to (R2,C1) if C moved first. 
E)  change the equilibrium to (R2,C2).

Question 17

Dale and Terry are racing automobiles around a track. Currently, Terry is in the lead. However, Dale has a faster car and is just behind Terry. The racers' strategies and payoffs are presented in the table below. The goal of the drivers is to do as well as possible in the race. There are a total of 43 cars on the track.   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 strategy,

Question 18

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.  
-In the game in Scenario 13.17, who moves first?

Accepted Answer

A)  Potential Entrant 
B)  Incumbent Monopoly 
C)  It's a sequential game; firms alternate moving first. 
D)  Both players move simultaneously. 
E)  Who moves first is decided by the equilibrium. 
A)  Potential Entrant 
B)  Incumbent Monopoly 
C)  It's a sequential game; firms alternate moving first. 
D)  Both players move simultaneously. 
E)  Who moves first is decided by the equilibrium.

Question 19

Joanna has a credit card account with Card Bank. Card Bank's available strategies are tp raise Joanna's credit card interest rate or do nothing. Joanna's available strategies are to transfer her Card Bank account balance to another creditor or do nothing. If Card Bank raises Joanna's interest rate and Joanna does nothing, Card Bank increases profits by $1,000 while Joanna receives -$1,000. If Card Bank raises Joanna's interest rate and Joanna transfers her account to another creditor, Card Bank receives -$300 while Joanna receives -$100. If Card Bank does nothing and Joanna does nothing, each player receives $0. If Card Bank does nothing and Joanna transfers her account to another creditor, Card Bank receives -$300 while Joanna receives -$150. Diagram the game tree for this sequential game. Indicate any Nash equilibria.

Accepted Answer

The Nash equilibrium is for bo

Question 20

Which of the following is NOT a key component of every game?

Accepted Answer

A)  Strategies 
B)  Players 
C)  Payoffs 
D)  Cooperation 
A)  Strategies 
B)  Players 
C)  Payoffs 
D)  Cooperation

What does it mean to say that a game is in "extensive form"?

Refer to Scenario 13.1. At your negotiated price the producer surplus is:

In the game in Scenario 13.14, each firm has a strategy that would not be chosen under any circumstances. This strategy is:

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:

Consider the following output-choice game for two firms: What is the outcome of the game if both firms use maximin strategies?

When, in the game in Scenario 13.14, the strategy that would not be chosen under any circumstances is removed, what is left is a:

For infinitely repeated games in which the players follow a tit-for-tat strategy, which one of the following outcomes is NOT possible?

Scenario 13.12 Consider the game below: -Playing the game in Scenario 13.12 by using a maximin strategy would:

Scenario 13.8 Consider the following game: -In game in Scenario 13.8, what is the Nash equilibrium?

In a Nash equilibrium,

Scenario 13.13 Consider the game below: -Playing the game in Scenario 13.13 sequentially would:

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. -In the game in Scenario 13.17, who moves first?

Which of the following is NOT a key component of every game?

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

Behavioral Economics

Filters

Exam 13: Game Theory and Competitive Strategy

What does it mean to say that a game is in "extensive form"?

Refer to Scenario 13.1. At your negotiated price the producer surplus is:

In the game in Scenario 13.14, each firm has a strategy that would not be chosen under any circumstances. This strategy is:

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:

Consider the following output-choice game for two firms: What is the outcome of the game if both firms use maximin strategies?

When, in the game in Scenario 13.14, the strategy that would not be chosen under any circumstances is removed, what is left is a:

For infinitely repeated games in which the players follow a tit-for-tat strategy, which one of the following outcomes is NOT possible?

Scenario 13.12 Consider the game below: -Playing the game in Scenario 13.12 by using a maximin strategy would:

Scenario 13.8 Consider the following game: -In game in Scenario 13.8, what is the Nash equilibrium?

In a Nash equilibrium,

Scenario 13.13 Consider the game below: -Playing the game in Scenario 13.13 sequentially would:

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. -In the game in Scenario 13.17, who moves first?

Which of the following is NOT a key component of every game?

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

Behavioral Economics

Filters