Exam 11: Game Theory and Strategic Behavior

Which of the following is a game in which players will be better off if they do not select their dominant strategies?

A plan of action of an oligopolist after taking into consideration reactions of the competitors is best known as

Two grocery stores compete against each other in a community. Both are considering an increase in advertising expenditures. Their interdependent alternatives are described by the payoff matrix. Firm 2 Advertise Don't Advertise Firm 1 Advertise (6,4) (9,2) Don'tAdvertise (3,9) (8,8) (i) Determine whether each firm has a dominant strategy and, if it does, identify the strategy. (ii) Determine the optimal strategy for each firm. (iii) Determine the Nash equilibrium. (iv) Is this a prisoners' dilemma? How do you know?

Firm A is better of spending high on advertising no matter what Firm B does. We can say that Firm A has a

The prisoners' dilemma explains why

Which one of the following conditions is required for the success of a tit-for-tat strategy?

Consider the following simultaneous move game: Player II Player I (400,300) (200,200) B (100,150) (300,100) In the matrix above the first number represents the payoff to Player I and the second number to Player II. For example, if both players choose action A, then Player I gains 400 and Player II gains 300. What is the dominant strategy for player II in this game?

Consider the following simultaneous move game: player II A B player I A (400,300) (200,200) B (100,150) (300,100) In the matrix above the first number represents the payoff to Player I and the second number to Player II. For example, if both players choose action A, then Player I gains 400 and Player II gains 300. What is the dominant strategy for player I in this game?

Game theory can be used to predict the behavior of nations in conflict.

A firm that is threatened by the potential entry of competitors into a market builds excess production capacity. This is an example of

The only two window makers compete for sales by increasing advertising. The two firms counter each other with higher and higher expenditures on advertising causing profits to be negative for both firms. This is an example of

A table that gives the profits that will result from all possible combinations of a firm's available strategies and its opponent's available responses is called a payoff matrix.

In game theory, the outcome or consequence of a strategy is referred to as the

A market has only two sellers. They are both trying to decide on a pricing strategy. If both firms charge a high price, then each firm will experience a 5 percent decrease in profits. If both firms charge a low price, then each firm will experience a 2 percent increase in profits. If Firm 1 charges a high price and Firm 2 charges a low price, then Firm 1 will experience a 1 percent increase in profits and Firm 2 will experience a 4 percent increase in profits. If Firm 2 charges a high price and Firm 1 charges a low price, then Firm 2 will experience a 3 percent increase in profits and Firm 1 will experience a 4 percent increase in profits. (i) Construct a payoff matrix for this game. (ii) Determine whether each firm has a dominant strategy and, if it does, identify the strategy. (iii) Determine the optimal strategy for each firm. (iv) Determine the Nash equilibrium. (v) Is this a prisoners' dilemma? How do you know?

While game theory is useful in analyzing the behavior of individual oligopolists, it does not apply to the behavior of nations that are engaged in competitive behavior.

Consider the following simultaneous move game: Player II Player I (400,300) (200,200) B (100,150) (300,100) In the matrix above the first number represents the payoff to Player I and the second number to Player II. For example, if both players choose action A, then Player I gains 400 and Player II gains 300. What is the best response of Player I if Player II chooses B?

Gaining a significant benefit from being the first to introduce a new product or service is known as

A pair of duopolists, Firm A and Firm B, manufacture seasonal toys. Both are planning their pricing strategies for the coming holiday season. The firms will choose between a low price (Low) and a high price (High). Firm A has a more flexible production and distribution system than Firm B and is therefore able to begin the season with one pricing strategy and then adopt a different strategy in midseason. While Firm B is unable to change its strategy in midseason, it can delay making a choice until after Firm A has announced its prices for the first part of the season. The firms' alternatives and payoffs are displayed in the decision tree diagram. Use this information to determine each firm's optimal strategy and anticipated payoff.

Firm A and Firm B operate retail malls. Both are trying to determine whether to increase advertising budgets during the holiday season or to keep them constant. Because of contract cycles, Firm A will have to make a commitment regarding an advertising budget before Firm B. Their alternatives and payoffs are displayed in the decision tree diagram. Use this information to determine each firm's optimal strategy and anticipated payoff.

Firm A and Firm B operate retail malls. Both are trying to determine whether to increase advertising budgets during the holiday season or to keep them constant. Because of contract cycles, Firm A will have to make a commitment regarding an advertising budget before Firm B. Their alternatives and payoffs are displayed in the decision tree diagram. Use this information to determine each firm's optimal strategy and anticipated payoff.