Question 1

A Nash equilibrium occurs when:

Accepted Answer

A)  each player has a dominant strategy. 
B)  each player receives the same final payoff. 
C)  each player believes it is doing the best it can given the behavior of rivals. 
D)  there is no dominant strategy for any player. 
E)  payoffs are independent of the actions taken by rivals. 
A)  each player has a dominant strategy. 
B)  each player receives the same final payoff. 
C)  each player believes it is doing the best it can given the behavior of rivals. 
D)  there is no dominant strategy for any player. 
E)  payoffs are independent of the actions taken by rivals. C

Question 2

The difference between game trees and decision trees is:

Accepted Answer

A)  that game trees are not useful in strategic situations. 
B)  that decision trees describe actions that depend on the behavior of rivals. 
C)  that game trees have interactive payoffs. 
D)  that decision trees are a function of many individuals and the state of nature. 
E)  none of the above. 
A)  that game trees are not useful in strategic situations. 
B)  that decision trees describe actions that depend on the behavior of rivals. 
C)  that game trees have interactive payoffs. 
D)  that decision trees are a function of many individuals and the state of nature. 
E)  none of the above. C

Question 3

How many Nash equilibria are there in this payoff matrix?

Accepted Answer

A)  0. 
B)  1. 
C)  2. 
D)  3. 
E)  4. 
A)  0. 
B)  1. 
C)  2. 
D)  3. 
E)  4. C

Question 4

Getting to a Nash equilibrium requires:

Accepted Answer

A)  each knowing the opponent's payoffs and cooperation. 
B)  knowing the opponent's payoffs but not cooperation. 
C)  cooperation but not knowing the opponent's payoffs. 
D)  neither cooperation nor knowing the opponent's payoffs. 
E)  either cooperation or knowing the opponent's payoffs, depending on the game. 
A)  each knowing the opponent's payoffs and cooperation. 
B)  knowing the opponent's payoffs but not cooperation. 
C)  cooperation but not knowing the opponent's payoffs. 
D)  neither cooperation nor knowing the opponent's payoffs. 
E)  either cooperation or knowing the opponent's payoffs, depending on the game.

Question 5

Consider the following decision tree.This tree illustrates hypothetical payoffs to General Mills (GM)and Quaker Oats (Q)if they engage in a price war.If GM cuts prices and Quaker Oats follows this behavior:

Accepted Answer

A)  GM loses $10 million. 
B)  Quaker Oats loses $10 million. 
C)  GM loses $2 million. 
D)  Quaker Oats loses $2 million. 
E)  both firms gain $3 million. 
A)  GM loses $10 million. 
B)  Quaker Oats loses $10 million. 
C)  GM loses $2 million. 
D)  Quaker Oats loses $2 million. 
E)  both firms gain $3 million.

Question 6

A dominant strategy is one that:

Accepted Answer

A)  beats all others, regardless of the opponent's choice. 
B)  beats all others, given the opponent's choice. 
C)  is beaten by all others, regardless of the opponent's choice. 
D)  is beaten by all others, given the opponent's choice. 
E)  beats at least one other, given the opponent's choice. 
A)  beats all others, regardless of the opponent's choice. 
B)  beats all others, given the opponent's choice. 
C)  is beaten by all others, regardless of the opponent's choice. 
D)  is beaten by all others, given the opponent's choice. 
E)  beats at least one other, given the opponent's choice.

Question 7

Radio City promises if you can find a lower advertised price for anything you bought at Radio City,anywhere in town within 30 days,it will return the difference plus 20%.A sophisticated game theoretic analysis suggests Radio City may be:

Accepted Answer

A)  losing money in the long run. 
B)  colluding with other stores. 
C)  using a commitment to threaten competitors. 
D)  preempting competitors. 
E)  using price leadership. 
A)  losing money in the long run. 
B)  colluding with other stores. 
C)  using a commitment to threaten competitors. 
D)  preempting competitors. 
E)  using price leadership.

Question 8

A player in a game theoretic model is:

Accepted Answer

A)  anyone working for a firm that is operating strategically. 
B)  a decision-making entity at a firm involved in a strategic game. 
C)  a firm that is operating as a perfect competitor. 
D)  a monopolist who produces a unique product with no close substitutes. 
E)  a stockholder at a firm involved in a strategic game. 
A)  anyone working for a firm that is operating strategically. 
B)  a decision-making entity at a firm involved in a strategic game. 
C)  a firm that is operating as a perfect competitor. 
D)  a monopolist who produces a unique product with no close substitutes. 
E)  a stockholder at a firm involved in a strategic game.

Question 9

By definition,a Nash equilibrium in a duopoly is the situation in which each player:

Accepted Answer

A)  plays a dominant strategy. 
B)  plays the best strategy given the other's strategies. 
C)  gets the highest possible payoff. 
D)  gets the highest payoff possible without lowering the opponent's payoff. 
E)  is happy with the outcome. 
A)  plays a dominant strategy. 
B)  plays the best strategy given the other's strategies. 
C)  gets the highest possible payoff. 
D)  gets the highest payoff possible without lowering the opponent's payoff. 
E)  is happy with the outcome.

Question 10

Refer to the accompanying matrix.Which of the following is a Nash equilibrium?

Accepted Answer

A)  Company A chooses Strategy 1 and Company B chooses Strategy 1. 
B)  Company A chooses Strategy 1 and Company B chooses Strategy 2. 
C)  Company A chooses Strategy 2 and Company B chooses Strategy 2. 
D)  Company A chooses Strategy 2 and Company B chooses Strategy 1. 
E)  None of the above. 
A)  Company A chooses Strategy 1 and Company B chooses Strategy 1. 
B)  Company A chooses Strategy 1 and Company B chooses Strategy 2. 
C)  Company A chooses Strategy 2 and Company B chooses Strategy 2. 
D)  Company A chooses Strategy 2 and Company B chooses Strategy 1. 
E)  None of the above.

Question 11

Given the following payoff matrix,who has a dominant strategy?

Accepted Answer

A)  It depends on what the other player does. 
B)  Both players have it. 
C)  Neither player has it. 
D)  A does; B doesn't. 
E)  B does; A doesn't. 
A)  It depends on what the other player does. 
B)  Both players have it. 
C)  Neither player has it. 
D)  A does; B doesn't. 
E)  B does; A doesn't.

Question 12

Refer to the accompanying payoff matrix.Which of the following is a Nash equilibrium?

Accepted Answer

A)  Company A chooses Strategy 1 and Company B chooses Strategy 1. 
B)  Company A chooses Strategy 1 and Company B chooses Strategy 2. 
C)  Company A chooses Strategy 2 and Company B chooses Strategy 2. 
D)  Company A chooses Strategy 2 and Company B chooses Strategy 1. 
E)  None of the above. 
A)  Company A chooses Strategy 1 and Company B chooses Strategy 1. 
B)  Company A chooses Strategy 1 and Company B chooses Strategy 2. 
C)  Company A chooses Strategy 2 and Company B chooses Strategy 2. 
D)  Company A chooses Strategy 2 and Company B chooses Strategy 1. 
E)  None of the above.

Question 13

Which pair of strategies would cooperative cartel members A and B choose given this payoff matrix?

Accepted Answer

A)  W, Y. 
B)  W, Z. 
C)  X, Y. 
D)  X, Z. 
E)  Either X, Y or W, Z. 
A)  W, Y. 
B)  W, Z. 
C)  X, Y. 
D)  X, Z. 
E)  Either X, Y or W, Z.

Question 14

A feasible strategy set is:

Accepted Answer

A)  all actions with a nonzero probability of occurring. 
B)  only actions that have a 50% or greater probability of occurring. 
C)  actions that result in positive profits for the firm. 
D)  actions that a decision maker is willing to take. 
E)  the one outcome that the decision maker chooses. 
A)  all actions with a nonzero probability of occurring. 
B)  only actions that have a 50% or greater probability of occurring. 
C)  actions that result in positive profits for the firm. 
D)  actions that a decision maker is willing to take. 
E)  the one outcome that the decision maker chooses.

Question 15

How many Nash equilibria are there in this payoff matrix?

Accepted Answer

A)  0. 
B)  1. 
C)  2. 
D)  3. 
E)  4. 
A)  0. 
B)  1. 
C)  2. 
D)  3. 
E)  4.

Question 16

Consider the following decision tree.This tree illustrates hypothetical payoffs to General Mills (GM)and Quaker Oats (Q)if they engage in a price war.  
If GM cuts prices,the greatest potential gain is:

Accepted Answer

A)  $5 million per year. 
B)  $10 million per year. 
C)  $2 million per year. 
D)  $3 million per year. 
E)  none of the above. 
A)  $5 million per year. 
B)  $10 million per year. 
C)  $2 million per year. 
D)  $3 million per year. 
E)  none of the above.

Question 17

Suppose that firm A finds itself facing the following payoff matrix in its rivalry with firm B:  
A threatens to play strategy W.This threat is:

Accepted Answer

A)  credible because the Nash equilibrium occurs where A plays W and B plays Z. 
B)  credible because the joint optimal solution occurs where A plays W and B plays Z. 
C)  not credible because A's dominant strategy is to play X. 
D)  credible because A's dominant strategy is to play W. 
E)  not credible because B will never play strategy Z. 
A)  credible because the Nash equilibrium occurs where A plays W and B plays Z. 
B)  credible because the joint optimal solution occurs where A plays W and B plays Z. 
C)  not credible because A's dominant strategy is to play X. 
D)  credible because A's dominant strategy is to play W. 
E)  not credible because B will never play strategy Z.

Question 18

If player 1 has a dominant strategy,then player 2:

Accepted Answer

A)  must also have a dominant strategy. 
B)  may or may not have a dominant strategy, but will always lead to a Nash equilibrium. 
C)  may or may not have a dominant strategy. 
D)  will not be able to reach an optimal solution to the game. 
E)  will block this dominant strategy and force player 1 to another strategy. 
A)  must also have a dominant strategy. 
B)  may or may not have a dominant strategy, but will always lead to a Nash equilibrium. 
C)  may or may not have a dominant strategy. 
D)  will not be able to reach an optimal solution to the game. 
E)  will block this dominant strategy and force player 1 to another strategy.

Question 19

If a firm has a dominant strategy:

Accepted Answer

A)  its optimal strategy depends on the play of rivals. 
B)  its optimal strategy is always the same, even if payoffs change. 
C)  it is determined by the behavior of only one key rival. 
D)  it receives the same profits regardless of the strategy of rivals. 
E)  its optimal strategy is independent of the play of rivals. 
A)  its optimal strategy depends on the play of rivals. 
B)  its optimal strategy is always the same, even if payoffs change. 
C)  it is determined by the behavior of only one key rival. 
D)  it receives the same profits regardless of the strategy of rivals. 
E)  its optimal strategy is independent of the play of rivals.

Question 20

Potential entrant E threatens to enter incumbent I's market and I threatens to lower price to P should E enter.It is crucial for E to believe I's threat that:

Accepted Answer

A)  P > I's average total cost. 
B)  P > I's average variable cost. 
C)  P is low enough to discourage E. 
D)  I could conceivably charge P without E's threat. 
E)  I's profit with P and no entry are better than expected profits with entry. 
A)  P > I's average total cost. 
B)  P > I's average variable cost. 
C)  P is low enough to discourage E. 
D)  I could conceivably charge P without E's threat. 
E)  I's profit with P and no entry are better than expected profits with entry.

A Nash equilibrium occurs when:

The difference between game trees and decision trees is:

How many Nash equilibria are there in this payoff matrix?

Getting to a Nash equilibrium requires:

Consider the following decision tree.This tree illustrates hypothetical payoffs to General Mills (GM)and Quaker Oats (Q)if they engage in a price war.If GM cuts prices and Quaker Oats follows this behavior:

A dominant strategy is one that:

Radio City promises if you can find a lower advertised price for anything you bought at Radio City,anywhere in town within 30 days,it will return the difference plus 20%.A sophisticated game theoretic analysis suggests Radio City may be:

A player in a game theoretic model is:

By definition,a Nash equilibrium in a duopoly is the situation in which each player:

Refer to the accompanying matrix.Which of the following is a Nash equilibrium?

Given the following payoff matrix,who has a dominant strategy?

Refer to the accompanying payoff matrix.Which of the following is a Nash equilibrium?

Which pair of strategies would cooperative cartel members A and B choose given this payoff matrix?

A feasible strategy set is:

How many Nash equilibria are there in this payoff matrix?

Consider the following decision tree.This tree illustrates hypothetical payoffs to General Mills (GM)and Quaker Oats (Q)if they engage in a price war. If GM cuts prices,the greatest potential gain is:

Suppose that firm A finds itself facing the following payoff matrix in its rivalry with firm B: A threatens to play strategy W.This threat is:

If player 1 has a dominant strategy,then player 2:

If a firm has a dominant strategy:

Potential entrant E threatens to enter incumbent I's market and I threatens to lower price to P should E enter.It is crucial for E to believe I's threat that:

Introduction

Demand Theory

Consumer Behavior and Rational Choice

Estimating Demand Functions

Production Theory

The Analysis of Costs

Perfect Competition

Monopoly and Monopolistic Competition

Managerial Use of Price Discrimination

Bundling and Intrafirm Pricing

Oligopoly

Auctions

Risk Analysis

Principalagent Issues and Managerial Compensation

Adverse Selection

Government and Business

Optimization Techniques

Appendix Problems

Filters

Exam 12: Game Theory

A Nash equilibrium occurs when:

The difference between game trees and decision trees is:

How many Nash equilibria are there in this payoff matrix?

Getting to a Nash equilibrium requires:

Consider the following decision tree.This tree illustrates hypothetical payoffs to General Mills (GM)and Quaker Oats (Q)if they engage in a price war.If GM cuts prices and Quaker Oats follows this behavior:

A dominant strategy is one that:

Radio City promises if you can find a lower advertised price for anything you bought at Radio City,anywhere in town within 30 days,it will return the difference plus 20%.A sophisticated game theoretic analysis suggests Radio City may be:

A player in a game theoretic model is:

By definition,a Nash equilibrium in a duopoly is the situation in which each player:

Refer to the accompanying matrix.Which of the following is a Nash equilibrium?

Given the following payoff matrix,who has a dominant strategy?

Refer to the accompanying payoff matrix.Which of the following is a Nash equilibrium?

Which pair of strategies would cooperative cartel members A and B choose given this payoff matrix?

A feasible strategy set is:

How many Nash equilibria are there in this payoff matrix?

Consider the following decision tree.This tree illustrates hypothetical payoffs to General Mills (GM)and Quaker Oats (Q)if they engage in a price war. If GM cuts prices,the greatest potential gain is:

Suppose that firm A finds itself facing the following payoff matrix in its rivalry with firm B: A threatens to play strategy W.This threat is:

If player 1 has a dominant strategy,then player 2:

If a firm has a dominant strategy:

Potential entrant E threatens to enter incumbent I's market and I threatens to lower price to P should E enter.It is crucial for E to believe I's threat that:

Introduction

Demand Theory

Consumer Behavior and Rational Choice

Estimating Demand Functions

Production Theory

The Analysis of Costs

Perfect Competition

Monopoly and Monopolistic Competition

Managerial Use of Price Discrimination

Bundling and Intrafirm Pricing

Oligopoly

Auctions

Risk Analysis

Principalagent Issues and Managerial Compensation

Adverse Selection

Government and Business

Optimization Techniques

Appendix Problems

Filters