Exam 10: Game Theory: Inside Oligopoly

Consider the following information for a simultaneous move game: If you advertise and your rival advertises, you each will earn $5 million in profits.If neither of you advertise, you will each earn $10 million in profits.However, if one of you advertises and the other does not, the firm that advertises will earn $15 million and the non advertising firm will earn $1 million.If you and your rival plan to hand your business down to your children (and this "bequest" goes on forever) then a Nash equilibrium when the interest rate is zero is

A dominant strategy for firm one is

-Which of the following are the Nash equilibrium payoffs (each period) if the game is repeated 10 times?

Which of the following conditions are necessary for the existence of a Nash equilibrium?

Use the following information to answer question: Suppose that you are a manager.You are considering whether or not to monitor employees with the payoffs in the following normal form game. -What should the manager do to solve the shirking problem?

Which of the following is a correct statement about a Nash equilibrium in a two-player game?

Which of the following represents the set of possible pure strategy Nash equilibrium?

The dominant strategy for Player 1 is:

Which of the following strategies constitutes a Nash equilibrium of the game:

The NCAA prohibits schools that are caught paying athletes from participating in bowl games, and sometimes the punishment is even more severe.Explain why schools don't break away from the NCAA and form a league in which athletes can legitimately be paid.(Hint: Use hypothetical payoffs to construct an illustrative normal-form game in which the strategies are "pay players" and "don't pay players." Then analyze the game in one-shot and infinitely repeated contexts.)

Which of the following is true?

Game theory is especially useful for analysis in the following types of markets:

Which of the following is not true?

In a one-shot game, if you advertise and your rival advertises, you will each earn $5 million in profits.If neither of you advertise, your rival will make $4 million and you will make $2 million.If you advertise and your rival does not, you will make $10 million and your rival will make $3 million.If your rival advertises and you do not, you will make $1 million and your rival will make $3 million. a.Write the above game in normal form. b.Do you have a dominant strategy? c.Does your rival have a dominant strategy? d.What is the Nash equilibrium for the one-shot game? e.How much would you be willing to bribe your rival not to advertise?

Use the following information to answer question: Suppose that you are a manager.You are considering whether or not to monitor employees with the payoffs in the following normal form game. -Which of the following pair of strategies constitute a Nash equilibrium?

Consider the following information for a simultaneous move game: If you advertise and your rival advertises, you each will earn $5 million in profits.If neither of you advertise, you will each earn $10 million in profits.However, if one of you advertises and the other does not, the firm that advertises will earn $15 million and the non advertising firm will earn $1 million.If you and your rival plan to be in business for only one year, the Nash equilibrium is

What are the Nash equilibrium strategies for Firm A and Firm B respectively in a one-shot game?

Which of the following are secure strategies for players one and two, respectively?

Consider the following innovation game.Firm A must decide whether or not to introduce a new product.Firm B must decide whether or not to clone firm A's product.If firm A introduces and B clones, then firm A earns $1 and B earns $10.If A introduces and B does not clone, then A earns $10 and B earns $2.If firm A does not introduce, both firms earn profits of 0.How many Nash equilibria are there for this game.

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 perfect equilibrium strategies?