Question 1

A coordination problem usually occurs in situations where there is:

Accepted Answer

A)  no Nash equilibrium in a game. 
B)  a unique, but undesirable Nash equilibrium. 
C)  a unique, secure strategy for both players. 
D)  more than one Nash equilibrium. 
A)  no Nash equilibrium in a game. 
B)  a unique, but undesirable Nash equilibrium. 
C)  a unique, secure strategy for both players. 
D)  more than one Nash equilibrium.

Question 2

Refer to the normal-form game of bargaining shown below.   Suppose that management and the union are bargaining over how much of a $500 surplus to give to the union. It is assumed that the surplus can only be split into $250 increments. Furthermore, negotiations are set up such that management and the union must simultaneously and independently write down the amount of surplus to allocate to the union. The payoff structure to this one-shot bargaining game is listed in Figure 10-16. Find the Nash equilibrium(ia) to this game.

Accepted Answer

A)  Union write down $0 and management write down $500. 
B)  Union write down $250 and management write down $250. 
C)  Union write down $500 and management write down $0. 
D)  All of the statements associated with this question constitute Nash equilibria. 
A)  Union write down $0 and management write down $500. 
B)  Union write down $250 and management write down $250. 
C)  Union write down $500 and management write down $0. 
D)  All of the statements associated with this question constitute Nash equilibria.

Question 3

Which of the following conditions are necessary for the existence of a Nash equilibrium?

Accepted Answer

A)  The existence of dominant strategies for both players. 
B)  The existence of a dominant strategy for one player and the existence of a secure strategy for another player. 
C)  The existence of a secure strategy for both players. 
D)  None of the answers is correct. 
A)  The existence of dominant strategies for both players. 
B)  The existence of a dominant strategy for one player and the existence of a secure strategy for another player. 
C)  The existence of a secure strategy for both players. 
D)  None of the answers is correct.

Question 4

The dominant strategy of player 1 in the following game is:

Accepted Answer

A)  S1. 
B)  S2. 
C)  S1 and S2. 
D)  A dominant strategy does not exist. 
A)  S1. 
B)  S2. 
C)  S1 and S2. 
D)  A dominant strategy does not exist.

Question 5

You are considering entering a market serviced by a monopolist. You currently earn $0 economic profits, while the monopolist earns $5. If you enter the market and the monopolist engages in a price war, you will lose $5 and the monopolist will earn $1. If the monopolist doesn't engage in a price war, you will each earn profits of $2.
a. Write out the extensive form of the above game.
b. There are two Nash equilibria for the game. What are they?
c. Is there a subgame perfect equilibrium? Explain.
d. If you were the potential entrant, would you enter? Explain why or why not.

Accepted Answer

a. The extensive form is presented in th

Question 6

The following depicts a normal-form game of price competition.   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)  5 
B)  20 
C)  25 
D)  35 
A)  5 
B)  20 
C)  25 
D)  35

Question 7

Would collusion be more likely in the shoe industry or in the airline industry? Why?

Accepted Answer

The airline industry seems to be more li

Question 8

Consider the following innovation game: Firm A must decide whether or not to introduce a new product. Firm B must decide whether or not to clone firm A's product. If firm A introduces and B clones, then firm A earns $1 and B earns $10. If A introduces and B does not clone, then A earns $10 and B earns $2. If firm A does not introduce, both firms earn profits of 0. How many Nash equilibria are there for this game?

Accepted Answer

A)  0 
B)  1 
C)  2 
D)  0, but there are secure strategies. 
A)  0 
B)  1 
C)  2 
D)  0, but there are secure strategies.

Question 9

If you advertise and your rival advertises, you each will earn $4 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 $1 million and the non-advertising firm will earn $5 million. If you and your rival plan to be in business for only one year, the Nash equilibrium is:

Accepted Answer

A)  for each firm to advertise. 
B)  for neither firm to advertise. 
C)  for your firm to advertise and the other not to advertise. 
D)  None of the answers is correct. 
A)  for each firm to advertise. 
B)  for neither firm to advertise. 
C)  for your firm to advertise and the other not to advertise. 
D)  None of the answers is correct.

Question 10

Which of the following are important determinants of collusion in pricing games?

Accepted Answer

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

Question 11

The figure below presents information for a one-shot game.   What are 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 12

Refer to the normal-form game of advertising shown below.   Suppose there is a 20 percent chance that the advertising game depicted in Figure 10-17 will end next period. What is the present value to firm B of cheating on the collusive strategy {do not advertise, do not advertise}?

Accepted Answer

A)  $0 
B)  $10 
C)  $125 
D)  $175 
A)  $0 
B)  $10 
C)  $125 
D)  $175

Question 13

Refer to the payoff matrix below.   The dominant strategy of Player 1 is:

Accepted Answer

A)  S1. 
B)  S2. 
C)  S1 and S2. 
D)  A dominant strategy does not exist. 
A)  S1. 
B)  S2. 
C)  S1 and S2. 
D)  A dominant strategy does not exist.

Question 14

The dominant strategy for player 1 in the following game is:

Accepted Answer

A)  S1. 
B)  S2. 
C)  S1 and S2. 
D)  None of the answers is correct. 
A)  S1. 
B)  S2. 
C)  S1 and S2. 
D)  None of the answers is correct.

Question 15

Refer to the normal-form game of price competition shown below.   Which of the following represents the set of possible pure strategy Nash equilibria?

Accepted Answer

A)  {A, C} 
B)  {A, B} 
C)  {(A, 
C) , (A, 
D) , (B, 
C) , (B, 
D) } 
D)  {C, D} 
A)  {A, C} 
B)  {A, B} 
C)  {(A, 
C) , (A, 
D) , (B, 
C) , (B, 
D) } 
D)  {C, D}

Question 16

In the game shown below, firms 1 and 2 must independently decide whether to charge high or low prices.   Which of the following are Nash equilibrium payoffs in the one-shot game?

Accepted Answer

A)  (0, 0) 
B)  (5, -5) 
C)  (-5, 5) 
D)  (10, 10) 
A)  (0, 0) 
B)  (5, -5) 
C)  (-5, 5) 
D)  (10, 10)

Question 17

Firms will try to signal superior quality of their goods by:

Accepted Answer

A)  making sales information available to the public. 
B)  advertising. 
C)  issuing warranties or guarantees. 
D)  making sales information available to the public and advertising. 
A)  making sales information available to the public. 
B)  advertising. 
C)  issuing warranties or guarantees. 
D)  making sales information available to the public and advertising.

Question 18

OPEC was an effective cartel for many years, but recently it has been unable to maintain a high price for oil. What factors do you think are contributing to the demise of OPEC?

Accepted Answer

At least three factors account for the d

Question 19

Refer to the following game.   If this one-shot game is repeated three times, the Nash equilibrium payoffs for firms A and B will be ______ each period.

Accepted Answer

A)  (10, 9) 
B)  (11, 11) 
C)  (-10, 7) 
D)  (15, 8) 
A)  (10, 9) 
B)  (11, 11) 
C)  (-10, 7) 
D)  (15, 8)

Question 20

Suppose that you are a manager. You are considering whether or not to monitor employees with the payoffs in the normal-form game shown below.   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. If you were the labor union, which type of "rules of play" would you prefer to divide the $50 surplus?

Accepted Answer

A)  One-shot, simultaneous-move game 
B)  One-shot, sequential-move game with management as the first mover 
C)  One-shot, sequential-move game with labor union as the first mover 
D)  One-shot, simultaneous-move game and one-shot, sequential-move game with management as the first mover 
A)  One-shot, simultaneous-move game 
B)  One-shot, sequential-move game with management as the first mover 
C)  One-shot, sequential-move game with labor union as the first mover 
D)  One-shot, simultaneous-move game and one-shot, sequential-move game with management as the first mover

A coordination problem usually occurs in situations where there is:

Which of the following conditions are necessary for the existence of a Nash equilibrium?

The dominant strategy of player 1 in the following game is:

The following depicts a normal-form game of price competition. 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?

Would collusion be more likely in the shoe industry or in the airline industry? Why?

Which of the following are important determinants of collusion in pricing games?

The figure below presents information for a one-shot game. What are secure strategies for firm A and firm B respectively?

Refer to the normal-form game of advertising shown below. Suppose there is a 20 percent chance that the advertising game depicted in Figure 10-17 will end next period. What is the present value to firm B of cheating on the collusive strategy {do not advertise, do not advertise}?

Refer to the payoff matrix below. The dominant strategy of Player 1 is:

The dominant strategy for player 1 in the following game is:

Refer to the normal-form game of price competition shown below. Which of the following represents the set of possible pure strategy Nash equilibria?

In the game shown below, firms 1 and 2 must independently decide whether to charge high or low prices. Which of the following are Nash equilibrium payoffs in the one-shot game?

Firms will try to signal superior quality of their goods by:

OPEC was an effective cartel for many years, but recently it has been unable to maintain a high price for oil. What factors do you think are contributing to the demise of OPEC?

Refer to the following game. If this one-shot game is repeated three times, the Nash equilibrium payoffs for firms A and B will be ______ each period.

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

A coordination problem usually occurs in situations where there is:

Which of the following conditions are necessary for the existence of a Nash equilibrium?

The dominant strategy of player 1 in the following game is:

The following depicts a normal-form game of price competition. 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?

Would collusion be more likely in the shoe industry or in the airline industry? Why?

Which of the following are important determinants of collusion in pricing games?

The figure below presents information for a one-shot game. What are secure strategies for firm A and firm B respectively?

Refer to the normal-form game of advertising shown below. Suppose there is a 20 percent chance that the advertising game depicted in Figure 10-17 will end next period. What is the present value to firm B of cheating on the collusive strategy {do not advertise, do not advertise}?

Refer to the payoff matrix below. The dominant strategy of Player 1 is:

The dominant strategy for player 1 in the following game is:

Refer to the normal-form game of price competition shown below. Which of the following represents the set of possible pure strategy Nash equilibria?

In the game shown below, firms 1 and 2 must independently decide whether to charge high or low prices. Which of the following are Nash equilibrium payoffs in the one-shot game?

Firms will try to signal superior quality of their goods by:

OPEC was an effective cartel for many years, but recently it has been unable to maintain a high price for oil. What factors do you think are contributing to the demise of OPEC?

Refer to the following game. If this one-shot game is repeated three times, the Nash equilibrium payoffs for firms A and B will be ______ each period.

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