Question 1

Scenario 13.5
Consider the following game:  
-In the game in Scenario 13.5,

Accepted Answer

A) there is one equilibrium: for both to expand West. 
B) there is one equilibrium: for both to expand South. 
C) there are two equilibria: either can expand in the West,and the other expands in the South. 
D) there is only a mixed strategies equilibrium. 
E) all four outcomes are equilibria. 
A) there is one equilibrium: for both to expand West. 
B) there is one equilibrium: for both to expand South. 
C) there are two equilibria: either can expand in the West,and the other expands in the South. 
D) there is only a mixed strategies equilibrium. 
E) all four outcomes are equilibria.

Question 2

The two largest auto manufacturers,Toyota and GM,have experimented with electric cars in the past,and they are currently considering the decision to introduce an electric car into the commercial automobile market.The payoffs from the possible actions are measured in millions of dollars per year,and the possible outcomes are summarized in the following game matrix:   If both firms enter the market simultaneously,what is the Nash equilibrium?

Accepted Answer

A) Toyota produces and GM does not produce. 
B) GM produces and Toyota does not produce. 
C) There are two Nash equilibria - GM produces and Toyota does not produce,or Toyota produces and GM does not produce. 
D) There is no Nash equilibrium in this game. 
A) Toyota produces and GM does not produce. 
B) GM produces and Toyota does not produce. 
C) There are two Nash equilibria - GM produces and Toyota does not produce,or Toyota produces and GM does not produce. 
D) There is no Nash equilibrium in this game.

Question 3

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 4

G.C.Donovan Company is a large pharmaceutical company located in the U.S.,but with worldwide sales.Donovan has recently developed two new medications that have been licensed for sale in European Union countries.One medication is an over-the-counter cold preparation that effectively eliminates all cold symptoms,while the other is an antibiotic that is effective against drug resistant bacteria.A European firm,Demtech Limited,has developed drugs that are similar to Donovan's and will be ready for the European market at approximately the same time.Liability concerns make it unlikely that either firm will choose to market both new drugs at this time.Both firms do plan to market one of the drugs this year.
Donovan's managers consider their own lack of reputation among European physicians to be an important obstacle in the antibiotic market.Consequently,Donovan feels more comfortable marketing the cold preparation.Demtech,on the other hand,has an excellent reputation among physicians but little experience in over thecounter drugs so that Demtech's competitive advantage is with the antibiotic.Should Demtech choose to market the cold remedy,it believes that its sales will increase if Donovan also enters the cold remedy market and advertises heavily.Similarly,Donovan anticipates that its sales in the antibiotic market would be enhanced if Demtech produces antibiotics,given Demtech's excellent reputation among physicians.In short,each firm believes that there are circumstances under which participation by the other firm will complement rather than compete with the firm's own sales.Profits in millions of dollars are given in the payoff matrix below.   a.Given the table above,does either firm have a dominant strategy? Is there a Nash equilibrium? (Explain the difference between a Nash equilibrium and a dominant strategy.)
b.Pharmaceutical firms within the EU are attempting to organize a risk pool that would share liability risks for new drugs.Since Donovan and Demtech are among the largest pharmaceutical companies operating in Europe,the benefits of the risk pool depend upon the participation of the other firm.Increased profits achieved through reduced risk liability (measured in millions of dollars)are shown in the payoff matrix below.   Does either firm have an incentive to use participation in the risk pool as a bargaining device in the drug-marketing decision? If so,what would be the nature of the bargain? How credible is the firm's bargaining position? What could be done to make the bargaining position more credible?

Accepted Answer

a. Demtech has a dominant strategy in th

Question 5

Consider the Matching Pennies game:   Suppose Player B always uses a mixed strategy with probability of 3/4 for head and 1/4 for tails.Which of the following strategies for Player A provides the highest expected payoff?

Accepted Answer

A) Mixed strategy with probability 1/4 on heads and 3/4 on tails 
B) Mixed strategy with probability 1/2 on heads and 1/2 on tails 
C) Mixed strategy with probability 3/4 on heads and 1/4 on tails 
D) Pure strategy in which Player A always selects heads 
A) Mixed strategy with probability 1/4 on heads and 3/4 on tails 
B) Mixed strategy with probability 1/2 on heads and 1/2 on tails 
C) Mixed strategy with probability 3/4 on heads and 1/4 on tails 
D) Pure strategy in which Player A always selects heads

Question 6

In the sequential version of a game using the same players,the same strategies,and the same possible outcomes as the original game,the equilibrium

Accepted Answer

A) may be different than in the original game. 
B) must be different than in the original game. 
C) will be the same as in the original game. 
D) is the same as the cooperative version of the original game. 
E) is the same as the noncooperative version of the original game. 
A) may be different than in the original game. 
B) must be different than in the original game. 
C) will be the same as in the original game. 
D) is the same as the cooperative version of the original game. 
E) is the same as the noncooperative version of the original game.

Question 7

Consider the Matching Pennies game:   Suppose Player A always uses a pure strategy that selects heads.What is Player B's optimal response to this pure strategy?

Accepted Answer

A) Always select heads. 
B) Always select tails. 
C) Mixed strategy with probability 1/2 on heads and 1/2 on tails 
D) There is no optimal pure or mixed strategy for this situation. 
A) Always select heads. 
B) Always select tails. 
C) Mixed strategy with probability 1/2 on heads and 1/2 on tails 
D) There is no optimal pure or mixed strategy for this situation.

Question 8

Repetition of a game

Accepted Answer

A) yields the same outcome,over and over. 
B) can result in behavior that is different from what it would be if the game were played only once. 
C) is not possible. 
D) makes cooperative games into non-cooperative games. 
E) is possible only if the payoffs in the matrix change. 
A) yields the same outcome,over and over. 
B) can result in behavior that is different from what it would be if the game were played only once. 
C) is not possible. 
D) makes cooperative games into non-cooperative games. 
E) is possible only if the payoffs in the matrix change.

Question 9

Consider two firms,X and Y,that produce super computers.Each can produce the next generation super computer for the military (M)or for civilian research (C).However,only one can successfully produce for both markets simultaneously.Also,if one produces M,the other might not be able to successfully produce M,because of the limited market.The following payoff matrix illustrates the problem.   a.Find the Nash equilibrium,and explain why it is a Nash equilibrium.
b.If Firm X were unsure that the management of Firm Y were rational,what would Firm X choose to do if it followed a maximin strategy? What would both firms do if they both followed a maximin strategy?

Accepted Answer

a. The Nash equilibrium occurs at the bo

Question 10

Megan and Amanda are both 7 years old and operate lemonade stands.Megan lives on the east side of Welch Avenue while Amanda resides on the west side of Welch Avenue.Each morning,the girls must decide whether to place their stand on Welch Avenue or Lincoln Avenue.When they set their stand-up,they don't know what the other will do and can't relocate.If both girls put their stand on Welch,both girls receive $175 in profits.If both girls put their stand on Lincoln,they each receive $75 in profits.If one girl sets their stand on Welch while the other operates on Lincoln,the stand on Welch earns $300 in profits while the stand on Lincoln earns $225.Diagram the relevant pay-off matrix.Does either girl 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 i

Question 11

Consider the Matching Pennies game:   Suppose both players use maximin strategies for this game.Is there a clear equilibrium outcome to the game in this case?

Accepted Answer

A) Yes,both players select heads 
B) Yes,both players select tails 
C) No,both players face the minimum payoff (-1)under both actions. 
D) We do not have enough information to answer this question. 
A) Yes,both players select heads 
B) Yes,both players select tails 
C) No,both players face the minimum payoff (-1)under both actions. 
D) We do not have enough information to answer this question.

Question 12

Scenario 13.13
Consider the game below:  
-If the game in Scenario 13.13 were not played sequentially,

Accepted Answer

A) the only equilibrium would be (R2,C1). 
B) the only equilibrium would be (R1,C2). 
C) the only equilibria would be (R2,C1)and (R1,C2). 
D) the only equilibria would be (R2,C1),(R1,C2)and a mixed strategy equilibrium. 
E) there would not be any equilibrium. 
A) the only equilibrium would be (R2,C1). 
B) the only equilibrium would be (R1,C2). 
C) the only equilibria would be (R2,C1)and (R1,C2). 
D) the only equilibria would be (R2,C1),(R1,C2)and a mixed strategy equilibrium. 
E) there would not be any equilibrium.

Question 13

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 14

Scenario 13.16
Consider the pricing game below:  
-What is true about dominant strategies in the game in Scenario 13.16?

Accepted Answer

A) Gelato is a dominant strategy for both firms. 
B) Yogurt is a dominant strategy for Gooi only. 
C) Yogurt is a dominant strategy for Ici only. 
D) Yogurt is a dominant strategy for both firms. 
E) There are no dominant strategies in the above game. 
A) Gelato is a dominant strategy for both firms. 
B) Yogurt is a dominant strategy for Gooi only. 
C) Yogurt is a dominant strategy for Ici only. 
D) Yogurt is a dominant strategy for both firms. 
E) There are no dominant strategies in the above game.

Question 15

The relationship between a pure-strategy Nash equilibrium and a dominant-strategy equilibrium is that

Accepted Answer

A) a dominant-strategy equilibrium is a special case of a pure-strategy Nash equilibrium. 
B) a pure-strategy Nash equilibrium is a special case of a dominant-strategy equilibrium. 
C) they are the same. 
D) there may not be a dominant-strategy equilibrium,but there always is a pure-strategy Nash equilibrium. 
E) they are mutually exclusive and exhaustive,in that a dominant-strategy equilibrium is the same thing as a mixed-strategy Nash equilibrium. 
A) a dominant-strategy equilibrium is a special case of a pure-strategy Nash equilibrium. 
B) a pure-strategy Nash equilibrium is a special case of a dominant-strategy equilibrium. 
C) they are the same. 
D) there may not be a dominant-strategy equilibrium,but there always is a pure-strategy Nash equilibrium. 
E) they are mutually exclusive and exhaustive,in that a dominant-strategy equilibrium is the same thing as a mixed-strategy Nash equilibrium.

Question 16

You are playing a game in which a dollar bill is auctioned.The highest bidder receives the dollar in return for the amount bid.However,the second-highest bidder must pay the amount that he or she bids,and gets nothing in return.The optimal strategy is:

Accepted Answer

A) to bid the smallest allowable increment below $1. 
B) to bid nothing. 
C) to bid $0.99. 
D) to bid more than a dollar. 
A) to bid the smallest allowable increment below $1. 
B) to bid nothing. 
C) to bid $0.99. 
D) to bid more than a dollar.

Question 17

Use the following statements to answer this question: I.If mixed strategies are allowed,every game has at least one Nash equilibrium.
II.The maximin strategy is optimal in the game of "matching pennies."

Accepted Answer

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

Question 18

Scenario 13.15
Consider the pricing game below:  
-Which is true about dominant strategies in the game in Scenario 13.15?

Accepted Answer

A) $80 is dominant for Simple; $70 is dominant for Boring. 
B) $80 is dominant for Simple; $25 is dominant for Boring. 
C) $35 is dominant for Simple; $70 is dominant for Boring. 
D) $35 is dominant for Simple; $25 is dominant for Boring. 
E) There are no dominant strategies in the above game. 
A) $80 is dominant for Simple; $70 is dominant for Boring. 
B) $80 is dominant for Simple; $25 is dominant for Boring. 
C) $35 is dominant for Simple; $70 is dominant for Boring. 
D) $35 is dominant for Simple; $25 is dominant for Boring. 
E) There are no dominant strategies in the above game.

Question 19

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 20

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.

Scenario 13.5 Consider the following game: -In the game in Scenario 13.5,

A maximin strategy

Consider the Matching Pennies game: Suppose Player B always uses a mixed strategy with probability of 3/4 for head and 1/4 for tails.Which of the following strategies for Player A provides the highest expected payoff?

In the sequential version of a game using the same players,the same strategies,and the same possible outcomes as the original game,the equilibrium

Consider the Matching Pennies game: Suppose Player A always uses a pure strategy that selects heads.What is Player B's optimal response to this pure strategy?

Repetition of a game

Consider the Matching Pennies game: Suppose both players use maximin strategies for this game.Is there a clear equilibrium outcome to the game in this case?

Scenario 13.13 Consider the game below: -If the game in Scenario 13.13 were not played sequentially,

Scenario 13.16 Consider the pricing game below: -What is true about dominant strategies in the game in Scenario 13.16?

The relationship between a pure-strategy Nash equilibrium and a dominant-strategy equilibrium is that

You are playing a game in which a dollar bill is auctioned.The highest bidder receives the dollar in return for the amount bid.However,the second-highest bidder must pay the amount that he or she bids,and gets nothing in return.The optimal strategy is:

Use the following statements to answer this question: I.If mixed strategies are allowed,every game has at least one Nash equilibrium. II.The maximin strategy is optimal in the game of "matching pennies."

Scenario 13.15 Consider the pricing game below: -Which is true about dominant strategies in the game in Scenario 13.15?

Which of the following are examples of cooperative games?

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

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 1-83

Markets With Asymmetric Information

Externalities and Public Goods

Filters

Exam 13: Game Theory and Competitive Strategy

Scenario 13.5 Consider the following game: -In the game in Scenario 13.5,

A maximin strategy

Consider the Matching Pennies game: Suppose Player B always uses a mixed strategy with probability of 3/4 for head and 1/4 for tails.Which of the following strategies for Player A provides the highest expected payoff?

In the sequential version of a game using the same players,the same strategies,and the same possible outcomes as the original game,the equilibrium

Consider the Matching Pennies game: Suppose Player A always uses a pure strategy that selects heads.What is Player B's optimal response to this pure strategy?

Repetition of a game

Consider the Matching Pennies game: Suppose both players use maximin strategies for this game.Is there a clear equilibrium outcome to the game in this case?

Scenario 13.13 Consider the game below: -If the game in Scenario 13.13 were not played sequentially,

Scenario 13.16 Consider the pricing game below: -What is true about dominant strategies in the game in Scenario 13.16?

The relationship between a pure-strategy Nash equilibrium and a dominant-strategy equilibrium is that

You are playing a game in which a dollar bill is auctioned.The highest bidder receives the dollar in return for the amount bid.However,the second-highest bidder must pay the amount that he or she bids,and gets nothing in return.The optimal strategy is:

Use the following statements to answer this question: I.If mixed strategies are allowed,every game has at least one Nash equilibrium. II.The maximin strategy is optimal in the game of "matching pennies."

Scenario 13.15 Consider the pricing game below: -Which is true about dominant strategies in the game in Scenario 13.15?

Which of the following are examples of cooperative games?

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

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 1-83

Markets With Asymmetric Information

Externalities and Public Goods

Filters