Question 1

For what values of x is strategy D strictly dominant for Firm B?

Accepted Answer

A) All x > 450. B) All x < 450. C) x = 450. D) x < 50. A) All x > 450. B) All x < 450. C) x = 450. D) x < 50. A

Question 2

Which of the following is a factor(s) affecting collusion in an infinitely repeated pricing game?

Accepted Answer

A) Number of firms. 
B) Firm size. 
C) History. 
D) All of the statements associated with this question are correct. 
A) Number of firms. 
B) Firm size. 
C) History. 
D) All of the statements associated with this question are correct. D

Question 3

Management and a labor union are bargaining over how much of a $50 surplus to give to the union.The $50 is divisible up to one cent.The players have one-shot to reach an agreement.Management has the ability to announce what it wants first, and then the labor union can accept or reject the offer.Both players get zero if the total amounts asked for exceed $50.Which of the following is a Nash equilibrium?

Accepted Answer

A) Management requests $50 and the labor union accepts $0. 
B) Management requests $35 and the labor union accepts $10. 
C) Management requests $20 and the labor union accepts $20. 
D) Management requests $25 and the labor union accepts $10. 
A) Management requests $50 and the labor union accepts $0. 
B) Management requests $35 and the labor union accepts $10. 
C) Management requests $20 and the labor union accepts $20. 
D) Management requests $25 and the labor union accepts $10. A

Question 4

What are the secure strategies for Firm A and Firm B respectively?

Accepted Answer

A) (low price, high price). 
B) (high price, low price). 
C) (high price, high price). 
D) (low price, low price). 
A) (low price, high price). 
B) (high price, low price). 
C) (high price, high price). 
D) (low price, low price).

Question 5

You are the bargaining coordinator for Sun Car Manufacturers.At present you are renegotiating the labor contract with the union representative.You are bargaining over an expected 20 percent increase in earnings over the next three-year contract period.You are trying to decide whether to offer one-third, one-half, or all of the increase in earnings to the union.The union rules are such that all contracts must be voted on.The additional earnings are contingent on getting started on the new contract next week.If an agreement isn't reached on the first round of negotiations, the firm will go out of business.The union representative tells you that if you do not give the union all of the additional profits, the union members will not vote for the agreement.
a.Show the extensive form of this game.
b.What will you offer the union? Why?

Accepted Answer

a.See Figure 10-12. @#IMG-DLM& Figure 10-12
b.The

Question 6

In the early 1990s, there was considerable uncertainty in the computer industry about whether the dominant operating system for future personal computers would be IBM's OS/2 or Microsoft's Windows.Ultimately, Windows emerged as the dominant system despite the fact that several trade publications viewed OS/2 as the superior system.Why do you think this outcome prevailed?

Accepted Answer

The problem of selecting an operating sy

Question 7

What are the dominant strategies for Firm A and Firm B respectively?

Accepted Answer

A) (low price, high price). 
B) (high price, low price). 
C) (high price, high price). 
D) neither firm has a dominant strategy. 
A) (low price, high price). 
B) (high price, low price). 
C) (high price, high price). 
D) neither firm has a dominant strategy.

Question 8

Which of the following pair of strategies constitute a Nash equilibrium of the game?

Accepted Answer

A) S1, t1. 
B) S1, t2. 
C) S2, t1. 
D) S1, t2 and S2, t1. 
A) S1, t1. 
B) S1, t2. 
C) S2, t1. 
D) S1, t2 and S2, t1.

Question 9

Suppose that Firm A deviates from a trigger strategy to support a high price.What is the present value of A's payoff from cheating?

Accepted Answer

A) 5. 
B) 20. 
C) 25. 
D) 35. 
A) 5. 
B) 20. 
C) 25. 
D) 35.

Question 10

For what values of x is strategy A strictly dominant for Firm A?

Accepted Answer

A) All x > 450. B) All x < 450. C) x = 450. D) x < 50. A) All x > 450. B) All x < 450. C) x = 450. D) x < 50.

Question 11

Suppose there is a 90 percent chance that the advertising game depicted in the above payoff matrix will end next period.The collusive agreement {(Not Advertise, Not Advertise)} is

Accepted Answer

A) sustainable since $175  $50. 
D) unsustainable since $11.11 > $50. 
A) sustainable since $175  $50. 
D) unsustainable since $11.11 > $50.

Question 12

When analyzing the behavior of oligopolists, which of the following is crucial for the success of game theoretic analysis?

Accepted Answer

A) Payoffs do not need to reflect the true payoffs of the oligopolists, they just need to be greater than or equal to zero. 
B) Assume that oligopolists always move simultaneously. 
C) Do not construct the payoffs of the oligopolists to be interdependent, as the payoff of one player usually does not affect the payoff of the other players. 
D) Make sure the problem you are considering is of a one-shot or repeated nature, and you model it accordingly because the order in which players make decisions is important. 
A) Payoffs do not need to reflect the true payoffs of the oligopolists, they just need to be greater than or equal to zero. 
B) Assume that oligopolists always move simultaneously. 
C) Do not construct the payoffs of the oligopolists to be interdependent, as the payoff of one player usually does not affect the payoff of the other players. 
D) Make sure the problem you are considering is of a one-shot or repeated nature, and you model it accordingly because the order in which players make decisions is important.

Question 13

Suppose the game is infinitely repeated, and the interest rate is 10%.Both firms agree to charge a high price, provided no player has charged in low price in the past.If both firms stick to this agreement, then the present value of Firm A's payoffs are:

Accepted Answer

A) 220. 
B) 110. 
C) 330. 
D) 550. 
A) 220. 
B) 110. 
C) 330. 
D) 550.

Question 14

OPEC was an effective cartel for many years, but recently it has been unable to maintain a high price of oil.What factors do you think are contributing to the demise of OPEC?

Accepted Answer

At least three factors account for the d

Question 15

What is the maximum interest rate that can sustain collusion?

Accepted Answer

A) 66.7%. 
B) 33%. 
C) 25%. 
D) 15%. 
A) 66.7%. 
B) 33%. 
C) 25%. 
D) 15%.

Question 16

If you and your rival plan to be in business for only one year, the Nash equilibrium is for your firm

Accepted Answer

A) and your rival to advertise. 
B) and your rival not to advertise. 
C) to advertise and your rival not to advertise. 
D) not to advertise and your rival to advertise. 
A) and your rival to advertise. 
B) and your rival not to advertise. 
C) to advertise and your rival not to advertise. 
D) not to advertise and your rival to advertise.

Question 17

Under what condition will Firm B have an incentive to adopt if Firm A adopts the innovation?

Accepted Answer

A) C > 30. 
B) C  C > 0. 
D) 35 > C > 25. 
A) C > 30. 
B) C  C > 0. 
D) 35 > C > 25.

Question 18

Consider the following entry game.Here, firm B is an existing firm in the market, and firm A is a potential entrant.Firm A must decide whether to enter the market (play "enter") or stay out of the market (play "not enter").If firm A decides to enter the market, firm B must decide whether to engage in a price war (play "hard"), or not (play "soft").By playing "hard", firm B ensures that firm A makes a loss of $1 million, but firm B only makes $1 million in profits.On the other hand, if firm B plays "soft", the new entrant takes half of the market, and each firm earns profits of $5 million.If firm A stays out, it earns zero while firm B earns $10 million.Which of the following are Nash equilibrium strategies?

Accepted Answer

A) (enter, hard) and (not enter, hard). 
B) (enter, soft) and (not enter, soft). 
C) (not enter, hard) and (enter, soft). 
D) (enter, hard) and (not enter, soft). 
A) (enter, hard) and (not enter, hard). 
B) (enter, soft) and (not enter, soft). 
C) (not enter, hard) and (enter, soft). 
D) (enter, hard) and (not enter, soft).

Question 19

Which of the following are important determinants of collusion in pricing games?

Accepted Answer

A) The number of firms. 
B) Firm size. 
C) History. 
D) All of the statements associated with this question are correct. 
A) The number of firms. 
B) Firm size. 
C) History. 
D) All of the statements associated with this question are correct.

Question 20

Suppose there is a 20 percent chance that the advertising game depicted in the above payoff matrix will end next period.What is the present value to Firms B of cheating on the collusive strategy {Do Not Advertise, Do Not Advertising}?

Accepted Answer

A) $0. 
B) $10. 
C) $125. 
D) $175. 
A) $0. 
B) $10. 
C) $125. 
D) $175.

For what values of x is strategy D strictly dominant for Firm B?

Which of the following is a factor(s) affecting collusion in an infinitely repeated pricing game?

What are the secure strategies for Firm A and Firm B respectively?

What are the dominant strategies for Firm A and Firm B respectively?

Which of the following pair of strategies constitute a Nash equilibrium of the game?

Suppose that Firm A deviates from a trigger strategy to support a high price.What is the present value of A's payoff from cheating?

For what values of x is strategy A strictly dominant for Firm A?

Suppose there is a 90 percent chance that the advertising game depicted in the above payoff matrix will end next period.The collusive agreement {(Not Advertise, Not Advertise)} is

When analyzing the behavior of oligopolists, which of the following is crucial for the success of game theoretic analysis?

Suppose the game is infinitely repeated, and the interest rate is 10%.Both firms agree to charge a high price, provided no player has charged in low price in the past.If both firms stick to this agreement, then the present value of Firm A's payoffs are:

OPEC was an effective cartel for many years, but recently it has been unable to maintain a high price of oil.What factors do you think are contributing to the demise of OPEC?

What is the maximum interest rate that can sustain collusion?

If you and your rival plan to be in business for only one year, the Nash equilibrium is for your firm

Under what condition will Firm B have an incentive to adopt if Firm A adopts the innovation?

Which of the following are important determinants of collusion in pricing games?

Suppose there is a 20 percent chance that the advertising game depicted in the above payoff matrix will end next period.What is the present value to Firms B of cheating on the collusive strategy {Do Not Advertise, Do Not Advertising}?

The Fundamentals of Managerial Economics

Market Forces: Demand and Supply

Quantitative Demand Analysis

The Theory of Individual Behavior

The Production Process and Costs

The Organization of the Firm

The Nature of Industry

Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

Basic Oligopoly Models

Pricing Strategies for Firms With Market Power

The Economics of Information

Advanced Topics in Business Strategy

A Managers Guide to Government in the Marketplace

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Exam 10: Game Theory: Inside Oligopoly

For what values of x is strategy D strictly dominant for Firm B?

Which of the following is a factor(s) affecting collusion in an infinitely repeated pricing game?

What are the secure strategies for Firm A and Firm B respectively?

What are the dominant strategies for Firm A and Firm B respectively?

Which of the following pair of strategies constitute a Nash equilibrium of the game?

Suppose that Firm A deviates from a trigger strategy to support a high price.What is the present value of A's payoff from cheating?

For what values of x is strategy A strictly dominant for Firm A?

Suppose there is a 90 percent chance that the advertising game depicted in the above payoff matrix will end next period.The collusive agreement {(Not Advertise, Not Advertise)} is

When analyzing the behavior of oligopolists, which of the following is crucial for the success of game theoretic analysis?

Suppose the game is infinitely repeated, and the interest rate is 10%.Both firms agree to charge a high price, provided no player has charged in low price in the past.If both firms stick to this agreement, then the present value of Firm A's payoffs are:

OPEC was an effective cartel for many years, but recently it has been unable to maintain a high price of oil.What factors do you think are contributing to the demise of OPEC?

What is the maximum interest rate that can sustain collusion?

If you and your rival plan to be in business for only one year, the Nash equilibrium is for your firm

Under what condition will Firm B have an incentive to adopt if Firm A adopts the innovation?

Which of the following are important determinants of collusion in pricing games?

Suppose there is a 20 percent chance that the advertising game depicted in the above payoff matrix will end next period.What is the present value to Firms B of cheating on the collusive strategy {Do Not Advertise, Do Not Advertising}?

The Fundamentals of Managerial Economics

Market Forces: Demand and Supply

Quantitative Demand Analysis

The Theory of Individual Behavior

The Production Process and Costs

The Organization of the Firm

The Nature of Industry

Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

Basic Oligopoly Models

Pricing Strategies for Firms With Market Power

The Economics of Information

Advanced Topics in Business Strategy

A Managers Guide to Government in the Marketplace

Filters