Exam 10: Game Theory: Inside Oligopoly

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. What should the manager do to solve the shirking problem?

Refer to the normal-form game of price competition shown below. Firm B is the incumbent facing potential entry from its rival, firm A. Firm A's strategies consist of {entry, stay out}. Firm B's strategies are then {hard if entry; hard if stay out; soft if entry; soft if stay out}. Find the non-subgame Nash equilibrium to this game, if one exists.

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

You are the manager of a firm that is "bargaining" with another firm over how much to pay for a key input your firm uses in production. Which type of bargaining would be "better" from your firm's point of view, simultaneous-move bargaining or take-it or leave-it bargaining? Explain carefully.

The dominant strategy for player 2 in the following game is:

Refer to the normal-form game of price competition in the payoff matrix below. Suppose the game is infinitely repeated, and the interest rate is 10 percent. Both firms agree to charge a high price, provided no player has charged a low price in the past. If both firms stick to this agreement, then the present value of firm A's payoffs are:

Refer to the normal-form game of price competition shown below. Firm A must decide whether or not to introduce a new product. If firm A introduces a new product, firm B must decide whether or not to clone the product. The payoff structure of the game is depicted in Figure 10-12. The subgame perfect Nash equilibrium to this game is:

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

Refer to the normal-form game of price competition shown below. Which of the following represents firm B's full strategy space?

Which of the following is true?

Which of the following enhances the ability of waste companies to collude?

Collusion is:

It is easier to sustain tacit collusion in an infinitely repeated game if:

You are the owner-operator of the Better Gas Station in a small southeastern town. Over the past 20 years, you and your rival have successfully kept prices at a very high level. You recently learned that your competitor is retiring and closing his station in two weeks. What should you do today? Why?

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. Which of the following pairs of strategies constitutes a Nash equilibrium?

Refer to the normal-form game of advertising shown below. Suppose there is a 90 percent chance that the advertising game depicted in Figure 10-17 will end next period. The collusive agreement {(not advertise, not advertise)} is:

Management and a labor union are bargaining over how much of a $100 surplus to give to the union. The $100 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 $100. Which of the following is NOT a Nash equilibrium?

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. The collusive agreement {(not advertise, not advertise)} is:

There are two existing firms in the market for computer chips. Firm A knows how to reduce the production costs for the chip and is considering whether to adopt the innovation or not. Innovation incurs a fixed setup cost of C, while increasing the revenue. However, once the new technology is adopted, another firm, B, can adopt it with a smaller setup cost of C/3. If A innovates and B does not, A earns $30 in revenue while B earns $10. If A innovates and B does likewise, both firms earn $20 in revenue. If neither firm innovates, both earn $10. If C = 12, which is the perfect equilibrium of the game?

Refer to the normal-form game of advertising shown below. Consider the advertising game in Figure 10-17. Firms A and B know the game will be played for exactly five periods. What is a Nash equilibrium to this game?