Question 1

A dominant strategy:

Accepted Answer

A)  guarantees a player a higher payoff than its competitor. 
B)  calls for a contingent course of action. 
C)  is the best response to any strategy that the other player might select. 
D)  minimizes the other player's payoff. 
E)  sometimes means using a mixed strategy. 
A)  guarantees a player a higher payoff than its competitor. 
B)  calls for a contingent course of action. 
C)  is the best response to any strategy that the other player might select. 
D)  minimizes the other player's payoff. 
E)  sometimes means using a mixed strategy.

Question 2

Define limit pricing. Under what conditions is it an optimal strategy?

Accepted Answer

Limit pricing occurs when a dominant fir

Question 3

Nintendo and Sony Playstation are each planning to introduce one new game into the market. Each is considering three different kinds of games: an urban action game like Grand Theft Auto, an adventure game like Tomb Raiders, or a strategy game like Sim City. The table shows each firm's profits (Sony's profit first) in millions of dollars:
   (a) Assuming the firms act independently, find the equilibrium outcome. Briefly, explain your answer. Is this game an example of the prisoner's dilemma?
(b) Nintendo knows for a fact that Sony will not decide on its new project for four months As CEO of Nintendo, what would you do immediately based on the analysis above?
(c) If the firms were free to coordinate their decisions, what agreement (and actions) would they take? Explain briefly.

Accepted Answer

A coordinated agreement would have Ninte

Question 4

What do we mean by a first mover advantage? Why is it an important strategy? Give an example to illustrate your answer.

Accepted Answer

The first mover advantage lies in the fa

Question 5

In a competitive situation involving the adoption of a common standard by all firms in the industry:

Accepted Answer

A)  each player should always adopt his own preferred standard to maximize profit. 
B)  the players will agree upon the standard that maximizes collective profits. 
C)  the use of dominant strategies will select the appropriate standard. 
D)  there will be multiple equilibria supporting different possible standards. 
E)  the players will agree on a compromise between their preferred standards. 
A)  each player should always adopt his own preferred standard to maximize profit. 
B)  the players will agree upon the standard that maximizes collective profits. 
C)  the use of dominant strategies will select the appropriate standard. 
D)  there will be multiple equilibria supporting different possible standards. 
E)  the players will agree on a compromise between their preferred standards.

Question 6

When is it optimal for players to adopt mixed strategies? What condition must an optimal mixed strategy satisfy?

Accepted Answer

A mixed strategy is optimal when there i

Question 7

What are the essential elements of a competitive situation (modeled as a game)?

Accepted Answer

Any competitive situation can be describ

Question 8

Determine all possible equilibrium outcomes in the following non-zero-sum game.
 $\begin{array}{l}
\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Firm L }\
\begin{array} { | c | c | c | } 
\hline \text { Firm } \mathrm { K } & \text { Strategy } \mathrm { P } & \text { Strategy Q } \
\hline \text { Strategy S } & 16,10 & 10,14 \
\hline \text { Strategy T } & 20,18 & 5,7 \
\hline
\end{array}
\end{array}$

Accepted Answer

Here, there are two

Question 9

The key assumption used in game theory is that each player:

Accepted Answer

A)  pursues his own self-interest, taking into account its rival's behavior. 
B)  is not affected by other players' actions. 
C)  seeks to outperform its competitors. 
D)  seeks to maximize the players' collective profits. 
E)  maximizes its expected utility independent of the rival's actions. 
A)  pursues his own self-interest, taking into account its rival's behavior. 
B)  is not affected by other players' actions. 
C)  seeks to outperform its competitors. 
D)  seeks to maximize the players' collective profits. 
E)  maximizes its expected utility independent of the rival's actions.

Question 10

The following table shows the payoffs for Firm 1 and Firm 2 in a zero-sum game:
Table 10-6
 $\begin{array}{c} 
\quad \quad \quad \text { Firm 2  }\
\begin{array}{ | c | c | c | } 
\hline \text { Firm 1 } & \text { C1 } & \text { C2 } \
\hline \text { R1 } & 4 & 2 \
\hline \text { R2 } & 0 & 6 \
\hline
\end{array}
\end{array}$
-Refer to Table 10-6. The equilibrium strategies for Firm 1 and 2 are:.

Accepted Answer

A)  R1 versus C2. 
B)  (.5R1, .5R2) versus (.5C1, .5C2). 
C)  (.75R1, .25R2) versus (.5C1, .5C2). 
D)  (.5R1, .5R2) versus (.75C1, .25C2). 
E)  The game is a constant-sum game. 
A)  R1 versus C2. 
B)  (.5R1, .5R2) versus (.5C1, .5C2). 
C)  (.75R1, .25R2) versus (.5C1, .5C2). 
D)  (.5R1, .5R2) versus (.75C1, .25C2). 
E)  The game is a constant-sum game.

Question 11

The following table lists the payoffs of two firms adopting three possible advertising strategies:
Table 10-5
 $\begin{array}{l}
\quad\quad\quad\quad\quad\quad\quad\quad\text { Firm } 2\
\begin{array} { | c | c | c | c | } 
\hline \text { Firm 1 } & \text { High } & \text { Medium } & \text { Low } \
\hline \text { High } & 3,2 & 4,1 & 5,0 \
\hline \text { Medium } & 1,6 & 5,4 & 3,3 \
\hline \text { Low } & 0,4 & 5,5 & 6,2 \
\hline
\end{array}
\end{array}$
-Refer to Table 10-5. Identify the true statement.

Accepted Answer

A)  Neither player has a dominant strategy. 
B)  Only Firm 1 has a dominant strategy. 
C)  Only Firm 2 has a dominant strategy. 
D)  Both firms have dominant-strategies. 
E)  The only equilibrium has both players using mixed strategies. 
A)  Neither player has a dominant strategy. 
B)  Only Firm 1 has a dominant strategy. 
C)  Only Firm 2 has a dominant strategy. 
D)  Both firms have dominant-strategies. 
E)  The only equilibrium has both players using mixed strategies.

A dominant strategy:

Define limit pricing. Under what conditions is it an optimal strategy?

What do we mean by a first mover advantage? Why is it an important strategy? Give an example to illustrate your answer.

In a competitive situation involving the adoption of a common standard by all firms in the industry:

When is it optimal for players to adopt mixed strategies? What condition must an optimal mixed strategy satisfy?

What are the essential elements of a competitive situation (modeled as a game)?

Determine all possible equilibrium outcomes in the following non-zero-sum game. Firm L Firm Strategy Strategy Q Strategy S 16,10 10,14 Strategy T 20,18 5,7

The key assumption used in game theory is that each player:

The following table shows the payoffs for Firm 1 and Firm 2 in a zero-sum game: Table 10-6 Firm 2 Firm 1 C1 C2 R1 4 2 R2 0 6 -Refer to Table 10-6. The equilibrium strategies for Firm 1 and 2 are:.

The following table lists the payoffs of two firms adopting three possible advertising strategies: Table 10-5 Firm 2 Firm 1 High Medium Low High 3,2 4,1 5,0 Medium 1,6 5,4 3,3 Low 0,4 5,5 6,2 -Refer to Table 10-5. Identify the true statement.

Introduction to Economic Decision Making

Optimal Decisions Using Marginal Analysis

Demand Analysis and Optimal Pricing

Estimating and Forecasting Demand

Production

Cost Analysis

Perfect Competition

Monopoly

Oligopoly

Regulation, Public Goods, and Benefit-Cost Analysis

Decision Making Under Uncertainty

The Value of Information

Asymmetric Information and Organizational Design

Bargaining and Negotiation

Linear Programming

Auctions and Competitive Bidding Available Online

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Exam 10: Game Theory and Competitive Strategy

A dominant strategy:

Define limit pricing. Under what conditions is it an optimal strategy?

What do we mean by a first mover advantage? Why is it an important strategy? Give an example to illustrate your answer.

In a competitive situation involving the adoption of a common standard by all firms in the industry:

When is it optimal for players to adopt mixed strategies? What condition must an optimal mixed strategy satisfy?

What are the essential elements of a competitive situation (modeled as a game)?

Determine all possible equilibrium outcomes in the following non-zero-sum game. Firm L Firm Strategy Strategy Q Strategy S 16,10 10,14 Strategy T 20,18 5,7

The key assumption used in game theory is that each player:

The following table shows the payoffs for Firm 1 and Firm 2 in a zero-sum game: Table 10-6 Firm 2 Firm 1 C1 C2 R1 4 2 R2 0 6 -Refer to Table 10-6. The equilibrium strategies for Firm 1 and 2 are:.

The following table lists the payoffs of two firms adopting three possible advertising strategies: Table 10-5 Firm 2 Firm 1 High Medium Low High 3,2 4,1 5,0 Medium 1,6 5,4 3,3 Low 0,4 5,5 6,2 -Refer to Table 10-5. Identify the true statement.

Introduction to Economic Decision Making

Optimal Decisions Using Marginal Analysis

Demand Analysis and Optimal Pricing

Estimating and Forecasting Demand

Production

Cost Analysis

Perfect Competition

Monopoly

Oligopoly

Regulation, Public Goods, and Benefit-Cost Analysis

Decision Making Under Uncertainty

The Value of Information

Asymmetric Information and Organizational Design

Bargaining and Negotiation

Linear Programming

Auctions and Competitive Bidding Available Online

Filters