Exam 8: Game Theory and Oligopoly

The credibility of an announcement by a firm's rival depends on how closely the firm's interests align with its rival.

A terminal node in a game tree is the starting point of the game.

Camp with Us and Happy Campers compete in the market for campers. Each firm must decide each season if they are going to offer special financing or not. The above payoff matrix shows each firm's net economic profit at each pair of strategies. -Refer to the payoff matrix above. In reference to the Nash equilibrium/equilibria in this game, which of the following is true?

Happy Campers wants to prevent Campers R Us from entering the camping market. If Happy Campers expands its capacity, the expansion can lead to all of the following except which one?

-Refer to the payoff matrix above. Which of the following is true for Happy Campers?

If Happy Feet advertises that it will undercut any competitor's price to keep another firm from entering the market, advertising will both increase and decrease Happy Feet's profit.

Happy Campers and Camping R Us are in tacit collusion to cooperate and each charge a high price for their campers. If Happy Campers initially cooperates with Camping R Us, but then switches and charges a low price and Camping R Us responds by forever charging a low price, this is an example of________ .

-Refer to the payoff matrix above. If Best Lights and Bright Lights both know that they will play the game a finite number of times, but neither firm knows when the last period will be, there ________an opportunity to earn higher profit because the managers________ worry about punishment for cheating.

Cheap talk helps firms cooperate and earn higher profit.

-Refer to the payoff matrix above. Which of the following is true for Best Lights?

If Firm A and Firm B are playing a finitely repeated game and both know when the final period is, cooperation________ _ possible due to the________ .

To make a threat more credible, managers can do all of the following except which one?

When each firm uses the strategy that maximizes its profit, it is possible for the equilibrium result to yield the worst possible joint equilibrium for all firms.

Happy Feet wants to prevent Best Nails from entering the nail salon market. If Happy Feet expands its capacity, the expansion can lead to all of the following except which one?

Cooperation is _________ likely in a repeated game because it _________ possible for players to punish each other for cheating.

Fast Ink wants to prevent Jet Ink from entering the ink market. If Fast Ink expands its capacity, the expansion can lead to all of the following except which one?

Pizza at Home is a frozen pizza company that supplies several large grocery store chains. The managers of Pizza at Home are currently negotiating a four year contract with Saucy Pizza, a manufacturer of pizza sauce. Saucy Pizza will supply a specified quantity of canned tomato sauce to Pizza at Home over a four year period; however; Pizza at Home can ends its contract with Saucy Pizza at the end of the first, second, or third years if Saucy Pizza does not supply quality tomato sauce. What can the manager of Pizza at Home do to avoid the end- game problem?

The manager of a large luxury hotel chain is currently negotiating a four year contract with a linens supplier. The linens company will supply fresh laundered bedding and towels to the hotel over a four year period; however, the hotel chain can ends its contract with the linens company at the end of the first, second, or third years if the linens company does not supply quality linens. What can the manager of the hotel chain do to avoid the end- game problem?

Happy Feet wants to prevent Best Nails from entering the nail salon market. The above game tree illustrates the different stra and corresponding payoffs for the two firms. Both Happy Feet and Best Nails have the same strategies of advertising (Ad) or advertising (No Ad). The payoffs represent net profit in millions. -If Happy Feet chooses to Ad, Best Nails should and earn million in net profit.

Best Lights wants to prevent Bright Lights from entering the light bulb market. If Best Lights expands its capacity, the expansion can lead to all of the following except which one?