Question 1

A dominant strategy exists when it is:

Accepted Answer

A)  suboptimal for a firm to choose that strategy regardless of what its rival does. 
B)  optimal for a firm to choose that strategy regardless of what its rival does. 
C)  optimal for a firm to choose an other strategy regardless of what its rival does. 
D)  suboptimal for a firm to choose an other strategy regardless of what its rival does. 
A)  suboptimal for a firm to choose that strategy regardless of what its rival does. 
B)  optimal for a firm to choose that strategy regardless of what its rival does. 
C)  optimal for a firm to choose an other strategy regardless of what its rival does. 
D)  suboptimal for a firm to choose an other strategy regardless of what its rival does. B

Question 2

In the Battle of the Sexes game, Man likes to go to football, while Woman likes to go to the mall. Both of them would rather go together than go alone. They decide to show up to one of these places without contacting each other. A game like this will:

Accepted Answer

A)  a dominant strategy for Man and none for Women. 
B)  one dominant strategy for both players. 
C)  no Nash equilibrium strategies. 
D)  a Nash equilibrium in mixed strategies. 
A)  a dominant strategy for Man and none for Women. 
B)  one dominant strategy for both players. 
C)  no Nash equilibrium strategies. 
D)  a Nash equilibrium in mixed strategies. D

Question 3

What are the key managerial insights derived from game theory? Which one is most important?

Accepted Answer

The most important managerial insight is that behavior of agents can be predicted by knowing the elements of the game: the identity of rivals, the rules of interaction in the game, and the payoffs from actions. As a manager you can make better decisions if you place yourself in the role of a rival in order to anticipate the rival's best response is to your actions. Then use backwards induction to pick the most profitable action anticipating the response of your rivals. Other insights include taking advantage of a first mover advantage by moving first, and understanding that repetition facilitates cooperation.

Question 4

Though Nash games are noncooperative, a cooperative outcome is more likely if:

Accepted Answer

A)  long run gains are smaller than short run gains. 
B)  firms can easily monitor the outcomes from rival's defection. 
C)  firms expect the market relationship to last only for a short time. 
D)  punishments from defection are credible. 
A)  long run gains are smaller than short run gains. 
B)  firms can easily monitor the outcomes from rival's defection. 
C)  firms expect the market relationship to last only for a short time. 
D)  punishments from defection are credible.

Question 5

Sealed bid construction contracts are examples of market games that are:

Accepted Answer

A)  simultaneous and non-repeated. 
B)  simultaneous and repeated. 
C)  sequential and non-repeated. 
D)  sequential and repeated. 
A)  simultaneous and non-repeated. 
B)  simultaneous and repeated. 
C)  sequential and non-repeated. 
D)  sequential and repeated.

Question 6

A display of a game in a tree-diagram with nodes for every move:

Accepted Answer

A)  is called a second-mover advantage. 
B)  is called a first-mover advantage. 
C)  is a simultaneous move game. 
D)  is an extensive form representation. 
A)  is called a second-mover advantage. 
B)  is called a first-mover advantage. 
C)  is a simultaneous move game. 
D)  is an extensive form representation.

Question 7

The benefit of the mixed strategy is:

Accepted Answer

A)  higher returns for both players in the market. 
B)  lower returns for both players in the markets. 
C)  the element of consistency that baffles the rivals. 
D)  the element of surprise that baffles the rivals. 
A)  higher returns for both players in the market. 
B)  lower returns for both players in the markets. 
C)  the element of consistency that baffles the rivals. 
D)  the element of surprise that baffles the rivals.

Question 8

As GMB moves to select a new passive restraint safety system for its buses, it finds that its competitor, VolgaBus, opposes the move with an alternative technology. GMB must now evaluate its strategy and determine whether:

Accepted Answer

A)  VolgaBus's alternative is credible. 
B)  the technology GMB selected is really superior. 
C)  the secure strategy is the best alternative. 
D)  VolgaBus should really be the first-mover. 
A)  VolgaBus's alternative is credible. 
B)  the technology GMB selected is really superior. 
C)  the secure strategy is the best alternative. 
D)  VolgaBus should really be the first-mover.

Question 9

When there are large network effects of adopting a new technology, firms often feel that government regulation or joint ventures can solve the:

Accepted Answer

A)  problem excessive investment. 
B)  coordination problem. 
C)  elimination of the new technology. 
D)  market problem. 
A)  problem excessive investment. 
B)  coordination problem. 
C)  elimination of the new technology. 
D)  market problem.

Question 10

We have two players A and B, where A can go L or R, and B can go T, B or R. The payoffs are decided after this. The best description of such games is:

Accepted Answer

A)  dominant strategies. 
B)  simultaneous moves. 
C)  sequential moves. 
D)  backward induction. 
A)  dominant strategies. 
B)  simultaneous moves. 
C)  sequential moves. 
D)  backward induction.

Question 11

The process of looking at the final outcome and then reasoning back to initial decisions is called:

Accepted Answer

A)  sequential decision-making. 
B)  simultaneous decision making. 
C)  forward induction. 
D)  backward induction. 
A)  sequential decision-making. 
B)  simultaneous decision making. 
C)  forward induction. 
D)  backward induction.

Question 12

You toss two coins and if Heads or Tails shows up then I give $ 1. If only one Heads shows up then you give me $ 1. We play this many times. Who comes up ahead at the end of the day?

Accepted Answer

No one. Since the probability

Question 13

A dominant strategy is one where the one firm picks:

Accepted Answer

A)  a strategy only after seeing the other firm's decision. 
B)  a strategy that must be repeated. 
C)  a strategy no matter what the rival does. 
D)  the same the strategy as the rival. 
A)  a strategy only after seeing the other firm's decision. 
B)  a strategy that must be repeated. 
C)  a strategy no matter what the rival does. 
D)  the same the strategy as the rival.

Question 14

A and B are going to play a game twice. During both repetitions, if they both select a low price or a high price, their market share stays the same. But if one selects a low price while the other selects a high price, then the only with the low gets more money while the one with the high price loses some market share. Based on this information what is the most likely outcome in both periods.

Accepted Answer

Start with the second period. If you are

Question 15

What is the difference between a repeated and a nonrepeated game and in which form is reputation an important consideration?

Accepted Answer

A nonrepeated game is one where the game

Question 16

Though Nash games are noncooperative, a cooperative outcome is more likely if

Accepted Answer

A)  long run gains are smaller than short run gains. 
B)  firms can easily monitor the outcomes from rival's defection. 
C)  firms expect the market relationship to last a long time. 
D)  firms expect the market relationship to last only for a short time. 
A)  long run gains are smaller than short run gains. 
B)  firms can easily monitor the outcomes from rival's defection. 
C)  firms expect the market relationship to last a long time. 
D)  firms expect the market relationship to last only for a short time.

Question 17

If two firms exist in the market, it is often expected that the Cournot (Nash) equilibrium will occur. If the firms have significant excess capacity, then it is likely that corporate strategy will emphasize:

Accepted Answer

A)  competition and high prices. 
B)  competition and low prices. 
C)  cooperation and low prices. 
D)  cooperation and high prices. 
A)  competition and high prices. 
B)  competition and low prices. 
C)  cooperation and low prices. 
D)  cooperation and high prices.

Question 18

A moves first and can go L, M or R. B moves second and can go R, M or L. If both of them end up at L or at R, A gets $ 1 and B get $ 0. If one ends up at L and the other at R then B gets $ 1 and A gets $ 0. If B ends up in M while A does not, then A gets $ -1 while B gets $ 2. If both of them end up in M then both get $ 0. Show that A has no first mover advantage in this game.B. When it is B's turn to move, she will go M regardless of what A does. Since A knows this, the best she can do is to go M. Hence, A gets $ 0 in this game. There is really no advantage in going first.

Accepted Answer

Since B moves second, we start with B. W

Question 19

Game theory between two firms with two outcomes tends to emphasize:

Accepted Answer

A)  noncooperative games. 
B)  cooperative games. 
C)  intra-firms decision-making. 
D)  purely competitive outcomes. 
A)  noncooperative games. 
B)  cooperative games. 
C)  intra-firms decision-making. 
D)  purely competitive outcomes.

Question 20

Which of the following statements is true?

Accepted Answer

A)  Every game has a dominant strategy. 
B)  Not every game has a dominant strategy. 
C)  Every game has multiple Nash Equilibria. 
D)  People always play the Nash equilibria. 
A)  Every game has a dominant strategy. 
B)  Not every game has a dominant strategy. 
C)  Every game has multiple Nash Equilibria. 
D)  People always play the Nash equilibria.

Exam 9: Economics of Strategy: Game Theory

A dominant strategy exists when it is:

In the Battle of the Sexes game, Man likes to go to football, while Woman likes to go to the mall. Both of them would rather go together than go alone. They decide to show up to one of these places without contacting each other. A game like this will:

What are the key managerial insights derived from game theory? Which one is most important?

Though Nash games are noncooperative, a cooperative outcome is more likely if:

Sealed bid construction contracts are examples of market games that are:

A display of a game in a tree-diagram with nodes for every move:

The benefit of the mixed strategy is:

As GMB moves to select a new passive restraint safety system for its buses, it finds that its competitor, VolgaBus, opposes the move with an alternative technology. GMB must now evaluate its strategy and determine whether:

When there are large network effects of adopting a new technology, firms often feel that government regulation or joint ventures can solve the:

We have two players A and B, where A can go L or R, and B can go T, B or R. The payoffs are decided after this. The best description of such games is:

The process of looking at the final outcome and then reasoning back to initial decisions is called:

You toss two coins and if Heads or Tails shows up then I give $ 1. If only one Heads shows up then you give me $ 1. We play this many times. Who comes up ahead at the end of the day?

A dominant strategy is one where the one firm picks:

What is the difference between a repeated and a nonrepeated game and in which form is reputation an important consideration?

Though Nash games are noncooperative, a cooperative outcome is more likely if

If two firms exist in the market, it is often expected that the Cournot (Nash) equilibrium will occur. If the firms have significant excess capacity, then it is likely that corporate strategy will emphasize:

Game theory between two firms with two outcomes tends to emphasize:

Which of the following statements is true?

Introduction

Economists View of Behavior

Markets, Organizations, and the Role of Knowledge

Demand

Production and Cost

Market Structure

Pricing With Market Power

Economics of Strategy: Creating and Capturing Value

Incentive Conflicts and Contracts

Organizational Architecture

Decision Rights: The Level of Empowerment

Decision Rights: Bundling Tasks Into Jobs and Subunits

Attracting and Retaining Qualified Employees

Incentive Compensation

Individual Performance Evaluation

Divisional Performance Evaluation

Corporate Governance

Vertical Integration and Outsourcing

Leadership: Motivating Change Within Organizations

Understanding the Business Environment: The Economics of Regulation

Ethics and Organizational Architecture

Organizational Architecture and the Process of Management Innovation

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