Exam 9: Thinking Strategically

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.What is the likely outcome of the game?

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. -If both players of a game choose the best strategy available given the other player's strategies,the result is a(n)

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. -Refer to the decision tree above.If Matthew did not know Dean's payoffs,i.e. ,the values for Dean in the decision tree were missing,one could predict that

A credible threat is an action that

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.The outcome of this game is ________ for Matthew and ________ for Dean,because ________.

The payoff matrix below shows the extra profit firms X and Z will earn from two different strategies,A and B. -Refer to the payoff matrix above.Suppose all the payoffs to strategies A and B double for both firms.The outcome of the game

An action that makes otherwise empty threats or promises credible is called a(n)

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 was developed in order to understand

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. -The basic source of instability in all cartel agreements stems from

Which of the following are conditions for successful collusion? 1.There are few firms in the industry. 2)Secret price cutting by individual members is detectable and punishable. 3)There exists a Nash equilibrium prior to the formation of a cartel.

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. -A Nash equilibrium must result in

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.The game is an example of a(n)

The reason most cartels end or cease to be effective is

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.The payoffs to Joe in this game are

Two competitive firms are located side by side.If firm A advertises,firm B will get new customers too,even though it does not have to pay for the advertising cost.The same scenario is true for A if B advertises.If both advertise,the amount of extra revenue generated would just offset the advertising costs.This is a situation where there exists a

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. -Refer to the decision tree above.Suppose Dean promises Matthew that he will always select the upper branch at either Y or Z.Dean offers to sign a legally-binding contract that penalizes him if he fails to choose the upper branch at Y or Z.For the contract to make Dean's promise credible,the value of the penalty must be

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 that Jim buys his ticket first.While Celia did not see which ticket Jim bought,she still knows the values in the payoff matrix.Predictably,Jim will buy a ticket to see

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.In this game,the strategies available to Sam are

If someone informs the clerk that he was given $20 in change when he was only owed $10,one can conclude that

A dominant strategy occurs when