Exam 9: Thinking Strategically

Suppose Jim and Celia,a married couple,are trying to decide what to do on a Friday.Jim would prefer to see Rambo X while Celia would prefer to see Das Auto,an arty foreign film.Both films are showing at the local Megaplex.The joy they receive from the films and seeing them together,or separately,is shown in the payoff matrix.Both Jim and Celia know the information contained in the payoff matrix.They purchase their tickets simultaneously,ignorant of the other's choice. -Refer to the payoff matrix above.Suppose a timing element is added to the game: assume Celia buys her ticket first.While Jim did not see which ticket Celia bought,he still knows the values in the payoff matrix.Acting on the basis of self interest,Celia will

In the ultimatum game in which player A divides a sum of money and then player B accepts or rejects the division,when the proposed distribution greatly favours player A,player B

A credible promise is an action that

Intel is ready to introduce its new microprocessor.In chip manufacturing,as more chips are produced,production yields rise.Thus,Intel can choose between a below-cost pricing strategy (upper branch)to reach the higher-yield zone more quickly,or an above-cost pricing strategy (lower branch)and move to the higher-yield zone more slowly.AMD will introduce its new microprocessor two months after Intel,and faces the same below-cost (upper branch)and above-cost (lower branch)strategies.Writing out the outcomes on the decision tree might prove helpful as you answer the following questions. -Refer to the decision tree above.AMD will

Which of the following would NOT solve a commitment problem?

Joe is the owner of the PetroCanada Mini Mart,Sam is the owner of the BP Mini Mart,and together they are the only gas stations in town.At the current price of $1 per litre,each receives total revenue of $1000.Joe is considering cutting his price to 90 cents per litre,which would increase his total revenue to $1350.If Sam's price remains at $1 per litre after Joe cuts his price,Sam will collect $500 in revenue.If Sam cuts his price to 90 cents per litre,his total revenue would also rise to $1350 if Joe continues to charge $1 per litre.Joe will collect $500 in revenue if he keeps his price at $1 per litre while Sam lowers his to 90 cents per litre.Joe and Sam will receive $900 each in total revenue if they both lower their price to 90 cents per litre.You may find it easier to answer the following questions if you fill in the payoff matrix below. -Refer to the information given above.To Sam,cutting his price to 90 cents per litre is a(n)

The key feature that requires the use of game theory to comprehend behaviour is

Suppose Jim and Celia,a married couple,are trying to decide what to do on a Friday.Jim would prefer to see Rambo X while Celia would prefer to see Das Auto,an arty foreign film.Both films are showing at the local Megaplex.The joy they receive from the films and seeing them together,or separately,is shown in the payoff matrix.Both Jim and Celia know the information contained in the payoff matrix.They purchase their tickets simultaneously,ignorant of the other's choice. -Which of the following is NOT a requirement of a game?

Mexico and OPEC both produce crude oil.Realizing that it would be in their best interest to form an agreement on production goals,a meeting is arranged and an informal,verbal agreement is reached.If both Mexico and OPEC stick to the agreement,OPEC will earn profit of $200 million and Mexico will earn profit of $100 million.If both Mexico and OPEC cheat,then OPEC will earn $175 million and Mexico will earn $80 million.If only OPEC cheats,then OPEC earns $185 million and Mexico $60 million.If only Mexico cheats,then Mexico earns $110 million and OPEC $150 million. -Refer to the information given above.The outcome of this game is

-The market demand shown in the diagram above represents the demand curve shared by two non-collusive and independent firms of equal size and efficiency,each with zero marginal cost.If neither of the existing firms wants to change the situation,to ensure a stable and profitable market for both firms,each firm will produce ___ bottles/day and each will charge a price of ____/bottle.

Intel is ready to introduce its new microprocessor.In chip manufacturing,as more chips are produced,production yields rise.Thus,Intel can choose between a below-cost pricing strategy (upper branch)to reach the higher-yield zone more quickly,or an above-cost pricing strategy (lower branch)and move to the higher-yield zone more slowly.AMD will introduce its new microprocessor two months after Intel,and faces the same below-cost (upper branch)and above-cost (lower branch)strategies.Writing out the outcomes on the decision tree might prove helpful as you answer the following questions. -Refer to the decision tree above.Point Y represents AMD choosing

The table below shows the payoff matrix in the form of short-run profit for two firms,A and B,for two different strategies,investing in new capital or not investing. -Refer to the payoff matrix above.For firm B,

Game theory is important in understanding

Under oligopoly,if one firm in an industry significantly increases advertising expenditures in order to capture a greater market share,it is most likely that other firms in that industry will

Which of the following circumstances does NOT involve game theory?

Mexico and OPEC both produce crude oil.Realizing that it would be in their best interest to form an agreement on production goals,a meeting is arranged and an informal,verbal agreement is reached.If both Mexico and OPEC stick to the agreement,OPEC will earn profit of $200 million and Mexico will earn profit of $100 million.If both Mexico and OPEC cheat,then OPEC will earn $175 million and Mexico will earn $80 million.If only OPEC cheats,then OPEC earns $185 million and Mexico $60 million.If only Mexico cheats,then Mexico earns $110 million and OPEC $150 million. -Refer to the information given above.OPEC finds that it has

The Organization of Petroleum Exporting Countries (OPEC)behaves in many ways like an international cartel.If the cartel were to hire a consulting firm to monitor the production rates of member countries,the economic reason for this monitoring would be to

Interdependence is an important consideration when modelling the behaviour of

Suppose Jim and Celia,a married couple,are trying to decide what to do on a Friday.Jim would prefer to see Rambo X while Celia would prefer to see Das Auto,an arty foreign film.Both films are showing at the local Megaplex.The joy they receive from the films and seeing them together,or separately,is shown in the payoff matrix.Both Jim and Celia know the information contained in the payoff matrix.They purchase their tickets simultaneously,ignorant of the other's choice. -Game theory is not useful in understanding perfect competition because

In the above decision tree,Matthew picks first and Dean picks second.Matthew and Dean both know the payoffs to each choice for both themselves and each other.In this game,Matthew is the remote owner of an office that is managed by Dean,and Dean promises to always choose the upper branch at Y or Z in order to maximize Matthew's payoff. -Refer to the above decision tree.Suppose that the society in which Matthew and Dean live is one in which some citizens behave dishonestly.One can predict that Matthew will pick ________ because ________.