Exam 28: Game Applications-Part A

Alec and Kim used to be much better friends than they are now.The problem is what to do about Christmas gifts? If they wait until Christmas morning and move simultaneously, their payoff matrix is Under the circumstances, Alec should publicly announce at Thanksgiving that he is not buying a Christmas gift for Kim.

An equilibrium in a sequential game is always a Nash equilibrium in a simultaneous game with equivalent payoffs.

In a small isolated town, there are two types of people, saints and crooks.In business dealings between any two residents of this town, the payoffs are below. What percentage of this town's residents would be saints in an evolutionary stable strategy?

In the movie Dr.Strangelove, crazed U.S.General Jack Ripper orders his B-52 bomber wing to launch a preemptive nuclear attack on the Soviet Union.General Ripper believes the payoffs for a U.S.first strike to be as follows The U.S.S.R.has a little surprise of its own in the movie.It has constructed a Doomsday Machine, which will automatically destroy all life on earth if the U.S.S.R.is attacked.With the Doomsday Machine operational, the payoffs for a U.S.first strike are as follows: a.Prior to the building of the Doomsday Machine, would a Soviet threat to retaliate be credible? Explain. b.How does the construction of the Doomsday Machine change this? c.What purpose did keeping construction of the Doomsday Machine secret serve? d.In the movie, the Soviet ambassador announced the existence of the Doomsday Machine only after the attack on the Soviet Union was in progress.Did this serve any useful strategic purpose? Why?

In a small isolated town, there are two types of people, saints and crooks.In business dealings between any two residents of this town, the payoffs are below. What percentage of this town's residents would be saints in an evolutionary stable strategy?

Alec and Kim used to be much better friends than they are now.The problem is what to do about Christmas gifts? If they wait until Christmas morning and move simultaneously, their payoff matrix is If Kim is worried that Alec is going to announce publicly what he is going to do at Thanksgiving, Kim would definitely be made better off by announcing her action publicly at Halloween.

Suppose AMD is considering cloning Intel's latest CPU chip.If AMD enters Intel's market, Intel can play Mean, expand its output, drop prices, and try to make AMD's profit as small as possible or play Nice by cutting back its output and sharing the market.AMD and Intel both know that after all moves are complete, the time-discounted profits of future chip production in billions of dollars are Assuming AMD moves first, which of the following is the Nash equilibrium for sequential play?

In the little town of Gas Pump, South Dakota, there are two gas stations across the street from each other, the East station and the West station.A local ordinance requires that they are permitted to change the price of gasoline only once a week at precisely 8:00a.m.on Monday and in 5 cent increments.For some time, the price of gasoline has been stable at $1.50 per gallon, but midweek, the price each station pays for gasoline changed to $1.50.Given the payoff matrix below, which of the following strategies is a pure strategy Nash equilibrium?

Suppose AMD is considering cloning Intel's latest CPU chip.If AMD enters Intel's market, Intel can play Mean, expand its output, drop prices, and try to make AMD's profit as small as possible or play Nice by cutting back its output and sharing the market.AMD and Intel both know that after all moves are complete, the time-discounted profits of future chip production in billions of dollars are Assuming AMD moves first, which of the following is the Nash equilibrium for sequential play?

Alec and Kim used to be much better friends than they are now.The problem is what to do about Christmas gifts? If they wait until Christmas morning and move simultaneously, their payoff matrix is If Alec commits at Thanksgiving time not to buy a gift for Kim, Kim will find it in her best interest

Suppose AMD is considering cloning Intel's latest CPU chip.If AMD enters Intel's market, Intel can play Mean, expand its output, drop prices, and try to make AMD's profit as small as possible or play Nice by cutting back its output and sharing the market.AMD and Intel both know that after all moves are complete, the time-discounted profits of future chip production in billions of dollars are Assuming AMD moves first, which of the following is the Nash equilibrium for sequential play?

Suppose Boeing and Airbus are both considering expanding their plant capacity as a strategic move but can't observe their opponent's move until their own move has been determined.The following are time-discounted values of all future profit streams in billions of dollars.Which of the following strategies are Nash equilibria?

Alec and Kim used to be much better friends than they are now.The problem is what to do about Christmas gifts? If they wait until Christmas morning and move simultaneously, their payoff matrix is If Alec commits at Thanksgiving time not to buy a gift for Kim, Kim will find it in her best interest

The February 24, 1997, issue of Forbes has an article about a private Belgian utility company which is aggressively expanding its overseas holdings.Loosely quoting from Forbes, "At least one of the Belgian utility's foreign moves was inspired by game theory.Last year, the Belgian utility paid $141 million for 49% of a Hungarian power station.The firm's CEO figured that if French utilities threatened to dump cheap power into the Belgian market, he could retaliate by dumping cheap Hungarian power into France." a.What is this CEO trying to accomplish? b.What is necessary for this plan to be successful?

In the little town of Gas Pump, South Dakota, there are two gas stations across the street from each other, the East station and the West station.A local ordinance requires that they are permitted to change the price of gasoline only once a week at precisely 8:00a.m.on Monday and in 5 cent increments.For some time, the price of gasoline has been stable at $1.50 per gallon, but midweek, the price each station pays for gasoline changed to $1.49.Given the payoff matrix below, which of the following strategies is a pure strategy Nash equilibrium?

In the classic 1960s macabre comedy Dr.Strangelove, the Soviet Union constructed a Doomsday Machine which would end all life on earth if ever the Soviet Union were attacked.In the movie, the existence of the Doomsday Machine was kept secret.This would enhance the effectiveness of such a machine.

Suppose Boeing and Airbus are both considering expanding their plant capacity as a strategic move but can't observe their opponent's move until their own move has been determined.The following are time-discounted values of all future profit streams in billions of dollars.Which of the following strategies are Nash equilibria?

Alec and Kim used to be much better friends than they are now.The problem is what to do about Christmas gifts? If they wait until Christmas morning and move simultaneously, their payoff matrix is Under the circumstances, Alec should publicly announce at Thanksgiving that he is not buying a Christmas gift for Kim.

Alec and Kim used to be much better friends than they are now.The problem is what to do about Christmas gifts? If they wait until Christmas morning and move simultaneously, their payoff matrix is If Kim is worried that Alec is going to announce publicly what he is going to do at Thanksgiving, Kim would definitely be made better off by announcing her action publicly at Halloween.

For the following scenarios, state whether the strategic effect of the firm's action will cause competitors to behave more or less aggressively, and why. a.Sleep Country USA announces that it will beat any competitor's advertised price by 5%. b.Termite Woods, a local, new home development, unexpectedly announces that it will decrease by 50% the number of homes it had planned to build in the coming year. c.Used car dealership Roach Motors announces a 25% price cut on its entire stock.