Question 1

Refer to the payoff matrix below.   Which of the following pairs of strategies constitutes a Nash equilibrium of the game?

Accepted Answer

A)  S1, t1 
B)  S1, t2 
C)  S2, t1 
D)  S1, t2 and S2, t1 
A)  S1, t1 
B)  S1, t2 
C)  S2, t1 
D)  S1, t2 and S2, t1 D

Question 2

The following depicts a normal-form game of price competition.   What is the maximum interest rate that can sustain collusion?

Accepted Answer

A)  66.7 percent 
B)  33 percent 
C)  25 percent 
D)  15 percent 
A)  66.7 percent 
B)  33 percent 
C)  25 percent 
D)  15 percent A

Question 3

Which of the following is a factor(s) affecting collusion in an infinitely repeated pricing game?

Accepted Answer

A)  Number of firms 
B)  Firm size 
C)  History 
D)  All of the statements associated with this question are correct. 
A)  Number of firms 
B)  Firm size 
C)  History 
D)  All of the statements associated with this question are correct. D

Question 4

Refer to the following game.   Which of the following is true?

Accepted Answer

A)  A dominant strategy for firm A is "high price." 
B)  There does not exist a dominant strategy for firm A. 
C)  A dominant strategy for firm B is "low price." 
D)  None of the answers is correct. 
A)  A dominant strategy for firm A is "high price." 
B)  There does not exist a dominant strategy for firm A. 
C)  A dominant strategy for firm B is "low price." 
D)  None of the answers is correct.

Question 5

Which of the following is NOT an important determinant of collusion in pricing games?

Accepted Answer

A)  The number of firms 
B)  The importance and magnitude of the item in a consumers' budget 
C)  History 
D)  All the statements associated with this question are important. 
A)  The number of firms 
B)  The importance and magnitude of the item in a consumers' budget 
C)  History 
D)  All the statements associated with this question are important.

Question 6

You are the manager of XYZ Inc. and must decide how much output to produce to maximize your firm's profit. XYZ and its rival, ABC Corp., produce a good that consumers view as essentially identical. These two firms make up the entire industry, so the market price for the good depends on the total amount produced by the two firms. A survey reveals that the market price of the product depends on total market output as follows:   XYZ and ABC each use labor, materials, and machines to produce output. XYZ purchases labor and materials on an as-needed basis; their machines were purchased three years ago and are being depreciated according to the straight-line method. XYZ's accounting department has provided the following data about its unit production costs:   Reports from industry experts suggest that ABC's cost structure is similar to XYZ's cost structure and that technological constraints require each firm to produce either 100 units or 200 units of output.
a. Briefly explain which costs are relevant for your decision, and why.
b. Write this game in normal form.
c. How many units should XYZ produce: 100 units or 200 units?

Accepted Answer

a. Direct labor and direct materials, si

Question 7

Management and a labor union are bargaining over how much of a $50 surplus to give to the union. The $50 is divisible up to one cent. The players have one shot to reach an agreement. Management has the ability to announce what it wants first, and then the labor union can accept or reject the offer. Both players get zero if the total amounts asked for exceed $50. Which of the following is a Nash equilibrium?

Accepted Answer

A)  Management requests $50 and the labor union accepts $0. 
B)  Management requests $35 and the labor union accepts $10. 
C)  Management requests $20 and the labor union accepts $20. 
D)  Management requests $25 and the labor union accepts $10. 
A)  Management requests $50 and the labor union accepts $0. 
B)  Management requests $35 and the labor union accepts $10. 
C)  Management requests $20 and the labor union accepts $20. 
D)  Management requests $25 and the labor union accepts $10.

Question 8

The following provides information for a one-shot game.   What are secure strategies for firm A and firm B respectively?

Accepted Answer

A)  (low price, low price) 
B)  (high price, low price) 
C)  (high price, high price) 
D)  Neither firm has a secure strategy. 
A)  (low price, low price) 
B)  (high price, low price) 
C)  (high price, high price) 
D)  Neither firm has a secure strategy.

Question 9

Refer to the game.   Which of the following pairs of strategies constitute a Nash equilibrium of the game?

Accepted Answer

A)  S1, t1 
B)  S1, t2 
C)  S2, t1 
D)  S1, t2 and S2, t1 
A)  S1, t1 
B)  S1, t2 
C)  S2, t1 
D)  S1, t2 and S2, t1

Question 10

In a one-shot game, if you advertise and your rival advertises, you will each earn $5 million in profits. If neither of you advertises, your rival will make $4 million and you will make $2 million. If you advertise and your rival does not, you will make $10 million and your rival will make $3 million. If your rival advertises and you do not, you will make $1 million and your rival will make $3 million.
a. Write the above game in normal form.
b. Do you have a dominant strategy?
c. Does your rival have a dominant strategy?
d. What is the Nash equilibrium for the one-shot game?
e. How much would you be willing to bribe your rival not to advertise?

Accepted Answer

a. @#IMG-DLM& b. Your dominant strategy is to adve

Question 11

Refer to the normal-form game of price competition in the payoff matrix below.   Suppose that firm A deviates from a trigger strategy to support a high price. What is the present value of A's payoff from cheating?

Accepted Answer

A)  70 
B)  50 
C)  30 
D)  20 
A)  70 
B)  50 
C)  30 
D)  20

Question 12

Consider the following information for a simultaneous move game: If you advertise and your rival advertises, you each will earn $5 million in profits. If neither of you advertises, you will each earn $10 million in profits. However, if one of you advertises and the other does not, the firm that advertises will earn $15 million and the non-advertising firm will earn $1 million. If you and your rival plan to be in business for 10 years, then the Nash equilibrium is:

Accepted Answer

A)  for each firm to advertise every year. 
B)  for neither firm to advertise in early years, but to advertise in later years. 
C)  for each firm to not advertise in any year. 
D)  for each firm to advertise in early years, but not advertise in later years. 
A)  for each firm to advertise every year. 
B)  for neither firm to advertise in early years, but to advertise in later years. 
C)  for each firm to not advertise in any year. 
D)  for each firm to advertise in early years, but not advertise in later years.

Question 13

The figure below presents information for a one-shot game.   If this one-shot game is repeated 100 times, the Nash equilibrium payoffs of the players will be ________________ each period.

Accepted Answer

A)  (2, 2) 
B)  (10, -8) 
C)  (-8, 10) 
D)  (6, 6) 
A)  (2, 2) 
B)  (10, -8) 
C)  (-8, 10) 
D)  (6, 6)

Question 14

Which of the following is NOT true?

Accepted Answer

A)  An extensive form representation usually provides more information than a normal-form representation of a game. 
B)  A normal-form game is most useful for sequential-move games. 
C)  The notion of perfect equilibrium is more useful in analyzing extensive-form games than normal-form games. 
D)  The notion of credible threats makes more sense in extensive-form representations than in normal-form representations of a game. 
A)  An extensive form representation usually provides more information than a normal-form representation of a game. 
B)  A normal-form game is most useful for sequential-move games. 
C)  The notion of perfect equilibrium is more useful in analyzing extensive-form games than normal-form games. 
D)  The notion of credible threats makes more sense in extensive-form representations than in normal-form representations of a game.

Question 15

Refer to the following game.   What are the Nash equilibrium strategies for firm A and firm B respectively?

Accepted Answer

A)  (low price, low price) 
B)  (high price, high price) 
C)  (low price, high price) 
D)  (low price, low price) and (high price, high price) 
A)  (low price, low price) 
B)  (high price, high price) 
C)  (low price, high price) 
D)  (low price, low price) and (high price, high price)

Question 16

Refer to the normal-form game of advertising shown below.   Suppose there is a 10 percent chance that the advertising game depicted in Figure 10-17 will end next period. What is the present value to firm A of agreeing to the strategy {do not advertise, do not advertise}?

Accepted Answer

A)  $125 
B)  $237.50 
C)  $1,250 
D)  None of the answers is correct. 
A)  $125 
B)  $237.50 
C)  $1,250 
D)  None of the answers is correct.

Question 17

Two executives were arrested by authorities for embezzling money from their firm. Short of a confession, the prosecutor only had enough evidence to put them away for 10 years. Given a confession, however, she was certain to put them behind bars for life without parole, since they killed a law enforcement officer who was investigating the case. The prosecutor put the two prisoners in separate rooms and told them the following: "If you confess and your partner does not, I'll give you a year's probated sentence but put your partner in the slammer for life without parole. Of course, if your partner confesses and you don't, you'll get the life sentence without parole and he'll get one year's probation. I must warn you, however, that if you both confess I'll have enough evidence to put you both away for life without parole."
a. Do you think the prosecutor's bargain will induce the two executives to confess? Explain.
b. Would your answer change if the life sentence carried the possibility of parole? Explain.

Accepted Answer

a. Yes. Given no parole, this is a one-s

Question 18

Which of the following is a valid critique of the use of game theory in economics?

Accepted Answer

A)  Payoffs to players may be difficult to measure. 
B)  Players may not have complete information about each other's payoffs. 
C)  Game theory assumes rational players. 
D)  All of the statements associated with this question are correct. 
A)  Payoffs to players may be difficult to measure. 
B)  Players may not have complete information about each other's payoffs. 
C)  Game theory assumes rational players. 
D)  All of the statements associated with this question are correct.

Question 19

Refer to the following game.   What are the secure strategies for firm A and firm B respectively?

Accepted Answer

A)  (low price, high price) 
B)  (high price, low price) 
C)  (high price, high price) 
D)  (low price, low price) 
A)  (low price, high price) 
B)  (high price, low price) 
C)  (high price, high price) 
D)  (low price, low price)

Question 20

Refer to the normal-form game of price competition shown below.   For what values of x is strategy B strictly dominant for firm A?

Accepted Answer

A) All x > 450 B) All x < 450 C) x = 450 D) x < 50 A) All x > 450 B) All x < 450 C) x = 450 D) x < 50

Refer to the payoff matrix below. Which of the following pairs of strategies constitutes a Nash equilibrium of the game?

The following depicts a normal-form game of price competition. What is the maximum interest rate that can sustain collusion?

Which of the following is a factor(s) affecting collusion in an infinitely repeated pricing game?

Refer to the following game. Which of the following is true?

Which of the following is NOT an important determinant of collusion in pricing games?

The following provides information for a one-shot game. What are secure strategies for firm A and firm B respectively?

Refer to the game. Which of the following pairs of strategies constitute a Nash equilibrium of the game?

Refer to the normal-form game of price competition in the payoff matrix below. Suppose that firm A deviates from a trigger strategy to support a high price. What is the present value of A's payoff from cheating?

The figure below presents information for a one-shot game. If this one-shot game is repeated 100 times, the Nash equilibrium payoffs of the players will be ________________ each period.

Which of the following is NOT true?

Refer to the following game. What are the Nash equilibrium strategies for firm A and firm B respectively?

Refer to the normal-form game of advertising shown below. Suppose there is a 10 percent chance that the advertising game depicted in Figure 10-17 will end next period. What is the present value to firm A of agreeing to the strategy {do not advertise, do not advertise}?

Which of the following is a valid critique of the use of game theory in economics?

Refer to the following game. What are the secure strategies for firm A and firm B respectively?

Refer to the normal-form game of price competition shown below. For what values of x is strategy B strictly dominant for firm A?

The Fundamentals of Managerial Economics

Market Forces: Demand and Supply

Quantitative Demand Analysis

The Theory of Individual Behavior

The Production Process and Costs

The Organization of the Firm

The Nature of Industry

Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

Basic Oligopoly Models

Pricing Strategies for Firms With Market Power

The Economics of Information

Advanced Topics in Business Strategy

A Managers Guide to Government in the Marketplace

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Exam 10: Game Theory: Inside Oligopoly

Refer to the payoff matrix below. Which of the following pairs of strategies constitutes a Nash equilibrium of the game?

The following depicts a normal-form game of price competition. What is the maximum interest rate that can sustain collusion?

Which of the following is a factor(s) affecting collusion in an infinitely repeated pricing game?

Refer to the following game. Which of the following is true?

Which of the following is NOT an important determinant of collusion in pricing games?

The following provides information for a one-shot game. What are secure strategies for firm A and firm B respectively?

Refer to the game. Which of the following pairs of strategies constitute a Nash equilibrium of the game?

Refer to the normal-form game of price competition in the payoff matrix below. Suppose that firm A deviates from a trigger strategy to support a high price. What is the present value of A's payoff from cheating?

The figure below presents information for a one-shot game. If this one-shot game is repeated 100 times, the Nash equilibrium payoffs of the players will be ________________ each period.

Which of the following is NOT true?

Refer to the following game. What are the Nash equilibrium strategies for firm A and firm B respectively?

Refer to the normal-form game of advertising shown below. Suppose there is a 10 percent chance that the advertising game depicted in Figure 10-17 will end next period. What is the present value to firm A of agreeing to the strategy {do not advertise, do not advertise}?

Which of the following is a valid critique of the use of game theory in economics?

Refer to the following game. What are the secure strategies for firm A and firm B respectively?

Refer to the normal-form game of price competition shown below. For what values of x is strategy B strictly dominant for firm A?

The Fundamentals of Managerial Economics

Market Forces: Demand and Supply

Quantitative Demand Analysis

The Theory of Individual Behavior

The Production Process and Costs

The Organization of the Firm

The Nature of Industry

Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

Basic Oligopoly Models

Pricing Strategies for Firms With Market Power

The Economics of Information

Advanced Topics in Business Strategy

A Managers Guide to Government in the Marketplace

Filters