Exam 18: Game Theory and Strategic Choices

Which of the following is an example of an anti-coordination game?

(Figure: Prisoners' Dilemma for Thelma and Louise) Use Figure: Prisoners' Dilemma for Thelma and Louise. Thelma and Louise are arrested and jailed for bank robbery. Given the payoff matrix in the figure, the Nash equilibrium behavior is for Thelma _____ and Louise _____. ​

Use the table with data for Gizelle and Devin to answer the question. Devin tries to put himself in Gizelle's place. He concludes that if he (Devin) charges $8, then Gizelle will charge _____ to earn a profit of _____. $\text { Table: Gizelle's and Devin's Smoothie Shops }$ Devin's price =\ 6 Devin's price =\ 8 Gizelle's price = Gizelle's profit =\ 3,000 Gizelle's profit =\ 6,000 \ 7 Devin's profit =\ 2,500 Devin's profit =\ 1,000 Gizelle's price = Gizelle's profit =\ 1,000 Gizelle's profit =\ 5,000 \ 9 Devin's profit =\ 5,000 Devin's profit =\ 4,000

Use the table, with data for Bella and Martin, to answer the question. If Bella and Martin successfully cooperate, then Bella's profit will be _____, and Martin's profit will be _____. Table: Bella's and Martin's Auto Oil Change Companies Martin's price =\ 35 Martin's price =\ 50 Bella's price = Bella's profit =\ 4,000 Bella's profit =\ 6,000 \ 40 Martin's profit =\ 3,500 Martin's profit =\ 1,000 Bella's price = Bella's profit =\ 1,000 Bella's profit =\ 5,000 \5 5 Martin's profit =\ 5,500 Martin's profit =\ 5,000

Which of the following is NOT an example of a coordination game?

While _____ markets do not necessarily lead to efficient outcomes, _____ markets tend to yield efficient outcomes.

Use the table, with data for workers and businesses, to answer the question. The payoff cells are labeled A, B, C, and D. { \text { Table: High Wage or Low Wage? } } \\ \begin{array} { | l | l | l | } \hline & { \begin{array} { c } \text { Businesses create unskilled } \\ \text { jobs. } \end{array} } & { \begin{array} { c } \text { Businesses create skilled } \\ \text { jobs. } \end{array} } \\ \hline \text { Workers don't get training. } & \text { A. A low-skilled labor market } & \begin{array} { l } \text { B. A shortage of skilled } \\ \text { workers } \end{array} \\ \hline \text { Workers get training. } & \text { C. A shortage of skilled jobs } & \begin{array} { l } \text { D. A high-skilled labor } \\ \text { market } \end{array} \\ \hline \end{array} The equilibria are cells _____. A high-income country would settle in _____, and a low-income country would settles in _____.

Use the table, with data for Peter and Olga, to answer the question. Peter and Olga live near a lake with open fishing, and both have fishing boats there. They are the only two sellers in their local fish market. What is likely to be the result in a Nash equilibrium? Table: Peter and Olga Fish in the Lake Olga fishes every day. Olga fishes two times each week. Peter fishes every day. Both Olga and Peter have smaller and smaller catches over time. Peter catches and sells more fish than Olga Peter fishes two times each week. Olga catches and sells more fish than Peter. Both Olga and Peter have large catches each fishing trip.

(Figure: Oligopoly Pricing Strategy in Wireless TV Market II) Use Figure: Oligopoly Pricing Strategy in Wireless TV Market II. If the two firms in the cable TV market collude: ​

How does the Prisoner's Dilemma show that markets can deliver bad outcomes?

When using coordination games to look at the issue of bank runs, the best outcome occurs when:

The table lists the profits of two different spa chains, Elite and Supreme. The profits depend on the number of locations each chain has in a certain city. Each chain has one location, and both owners are considering expansion. If you were the owner of Elite Day Spas, what would you do if you want to gain a first-mover advantage? Table: Profits of Elite Day Spa and Supreme Day Spa (in thousands of dollars) Elite has one location. Elite has two locations. Elite has three locations. Supreme has one location. Supreme profits =\ 30 Elite profits =\ 30 Supreme profits =\ 15 Elite profits =\ 50 Supreme profits =\ 7 Elite profits =\ 35 Supreme has two locations. Supreme profits =\ 50 Elite profits =\ 15 Supreme profits =\ 20 Elite profits =\ 20 Supreme profits =\ 6 Elite profits =\ 10 Supreme has three locations. Supreme profits =\ 35 Elite profits =\ 7 Supreme profits =\ 10 Elite profits =\ 6 Supreme profits =\ 0 Elite profits =\ 0

How can a coordination game with multiple equilibria help explain the difference between wages in less developed countries and wages in more highly developed countries?

(Figure: Oligopoly Pricing Strategy in Wireless TV Market II) Use Figure: Oligopoly Pricing Strategy in Wireless TV Market II. The BEST response for Next Wireless: ​

If a player has a Grim Trigger strategy, that player:

Which of the following statements regarding a Nash equilibrium is TRUE?

When a market uses a resource owned in common, then in the Nash equilibrium in that market,:

Which of the following is NOT an example of an anti-coordination game?

Use the table, with data for workers and businesses, to answer the question. The payoff cells are labeled A, B, C, and D. { \text { Table: High Wage or Low Wage? } } \\ \begin{array} { | l | l | l | } \hline & { \begin{array} { c } \text { Businesses create unskilled } \\ \text { jobs. } \end{array} } & { \begin{array} { c } \text { Businesses create skilled } \\ \text { jobs. } \end{array} } \\ \hline \text { Workers don't get training. } & \text { A. A low-skilled labor market } & \begin{array} { l } \text { B. A shortage of skilled } \\ \text { workers } \end{array} \\ \hline \text { Workers get training. } & \text { C. A shortage of skilled jobs } & \begin{array} { l } \text { D. A high-skilled labor } \\ \text { market } \end{array} \\ \hline \end{array} If payoffs in cells A or D are equally likely, which of the following approaches would help solve the problem and lead to D?

(Figure: Payoff Matrix for George and Garner) Use Figure: Payoff Matrix for George and Garner. The figure describes two people who sell handmade porcelain figurines in San Francisco. Both George and Garner have two strategies available to them: to produce 5,000 figurines each month or to produce 7,000 figurines each month. For both George and Garner, the BEST response is to: ​