Deck 15: Strategic Games

Question 1

In repeated games,all of the below make it easier to get out of bad situations except

A)Be nice,no strikes first
B)Respond immediately to rivals
C)Punish competitors as much as you can
D)Make sure your competitors can easily interpret your actions

Answer 1

C

Question 2

The prisoner's dilemma is an example of: 

A)A sequential game
B)A non-cooperative game.
C)A shirking game
D)A dating game

Answer 2

B

Question 3

According to Prisoners'' Dilemma

A)Both parties do not confess
B)It is difficult to maintain cooperation among prisoners
C)Both a and b
D)None of the above

Answer 3

B

Question 4

Use the following to answer question 2- 5.
Consider the following information for a simultaneous move game: Two discount stores (megastore and superstore)are interested in expanding their market share through advertising.The table below depicts the strategic outcomes (profits)of both stores with and without advertising.Payoffs for Megastore are in bold.

Based on the answer of question 4,the payoffs for both stores will be

A)Megastore $95 and Superstore $80
B)Megastore $305 and Superstore $55
C)Megastore $65 and Superstore $285
D)Megastore $165 and Superstore $115

Question 5

Which of the following is a violation of the antitrust laws?

A)A firm discussing/fixing price with its competitors
B)Making arrangements to stay out each other's markets
C)Merging with the competitor to eliminate competition
D)All of the above are violations

Question 6

Use the following to answer question 2- 4.
Consider the following information for a simultaneous move game: If you charge a low price (LP)and your rival charges a LP,you each will earn $5 million in profits.If both charge a high price (HP),each will each earn $10 million in profits.However,if one charge a LP and the other does not,the firm that charges a LP will earn $15 million and the other firm will earn $1 million.
If the businesses last forever,then the Nash Equilibrium is

A)for one firm to charge a HP forever
B)for your firm charge a LP when the other firm does
C)for each firm to charge HP until the rival does,and then to charge a LP forever.
D)for each firm to charge LP until the rival does,and then to charge a HP forever.

Question 7

Use the following to answer question 2- 4.
Consider the following information for a simultaneous move game: If you charge a low price (LP)and your rival charges a LP,you each will earn $5 million in profits.If both charge a high price (HP),each will each earn $10 million in profits.However,if one charge a LP and the other does not,the firm that charges a LP will earn $15 million and the other firm will earn $1 million.
If both firms plan to be in business for one-year,the Nash Equilibrium will be

A)For each firm charge LP
B)For neither firm to charge LP
C)For one firm to charge LP and the other HP
D)None of the above.

Question 8

Use the following to answer question 2- 4.
Consider the following information for a simultaneous move game: If you charge a low price (LP)and your rival charges a LP,you each will earn $5 million in profits.If both charge a high price (HP),each will each earn $10 million in profits.However,if one charge a LP and the other does not,the firm that charges a LP will earn $15 million and the other firm will earn $1 million.
If both firms plan to be in business for 5 years,then the Nash Equilibrium will be

A)For each firm charge a LP every year
B)For neither firm to charge a LP in early years,but to charge a HP in later years.
C)For each firm to charge a HP every year
D)For neither firm to charge a HP in early years,but to charge a LP in later years.

Question 9

Refer to the following normal form game of price competition for questions 20 - 23.

If this game is played once,then

A)Firm A will charge a lower price and firm B will charge a lower price
B)Firm A will charge a higher price and firm B will charge a lower price
C)Firm A will charge a lower price and firm B will charge a higher price
D)Firm A will charge a higher price and firm B will charge a higher price

Question 10

Use the following to answer question 2- 5.
Consider the following information for a simultaneous move game: Two discount stores (megastore and superstore)are interested in expanding their market share through advertising.The table below depicts the strategic outcomes (profits)of both stores with and without advertising.Payoffs for Megastore are in bold.

The Nash equilibrium for both stores is

A)For megastore to advertise and for superstore to advertise
B)For megastore to advertise and for superstore not to advertise
C)For megastore not to advertise and for superstore to advertise
D)For megastore not to advertise and for superstore not to advertise

Question 11

Use the following to answer question 2- 5.
Consider the following information for a simultaneous move game: Two discount stores (megastore and superstore)are interested in expanding their market share through advertising.The table below depicts the strategic outcomes (profits)of both stores with and without advertising.Payoffs for Megastore are in bold.

When the game does reach the Nash Equilibrium,the payoffs for both stores will be

A)Megastore $95 and Superstore $80
B)Megastore $305 and Superstore $55
C)Megastore $65 and Superstore $285
D)Megastore $165 and Superstore $115

Question 12

Use the table below to answer questions 5-7.Assume it's a simultaneous-move game.

What's the dominant strategy for each firm?

A)Charge a low price
B)Charge a high price
C)Firm A charge a low price and firm B charge a high price
D)Firm A charge a high price and firm B charge a low price

Question 13

Use the following to answer question 2- 5.
Consider the following information for a simultaneous move game: Two discount stores (megastore and superstore)are interested in expanding their market share through advertising.The table below depicts the strategic outcomes (profits)of both stores with and without advertising.Payoffs for Megastore are in bold.

If collusion was not illegal,than it is more optimal

A)For megastore to advertise and for superstore to advertise
B)For megastore to advertise and for superstore not to advertise
C)For megastore not to advertise and for superstore to advertise
D)For megastore not to advertise and for superstore not to advertise

Question 14

Prisoners Dilemma show

A)Rational choices lead to bad outcomes
B)Rational choices lead to good outcomes
C)That there are no ways to learn where the pitfalls lie
D)None of the above

Question 15

Use the table below to answer questions 5-7.Assume it's a simultaneous-move game.

If the game is played for 10 years,the Nash equilibrium will be

A)Low,Low
B)Low,High
C)High,Low
D)High,High

Question 16

Use the table below to answer questions 5-7.Assume it's a simultaneous-move game.

What are the Nash equilibrium strategies for Firm A and Firm B respectively?

A)Low,Low
B)Low,High
C)High,Low
D)High,High

Question 17

In a two-person repeated game,a tit-for-tat strategy refers to

A)Where each player pursues his or her own self-interest without any cooperation
B)Where players start off as non-cooperative and then cooperate when one or both players show interest in colluding
C)Where players start off by cooperating and then mimic the other player's last move
D)Players cooperating throughout with no defection

Question 18

Use the table below to answer questions 5-7.Assume it's a simultaneous-move game.

Game theory assumes that to compute the likely outcome of games,one needs to assume that players act

A)Rationally
B)Optimally
C)In their own self-interest
D)All the above

Question 19

Use the table below to answer questions 5-7.Assume it's a simultaneous-move game.

Nash equilibrium is:

A)where one player maximizes his payoff and the other doesn't
B)where each player maximizes the expected payoff
C)similar to a dominant strategy
D)difficult to determine

Question 20

Use the table below to answer questions 5-7.Assume it's a simultaneous-move game.

First-mover advantage is a characteristic of

A)A simultaneous-move game
B)A dominant strategy
C)A sequential-move game
D)A Nash equilibrium

Question 21

Refer to the following normal form game of price competition for questions 20 - 23.

What is the payoff for each firm in this one-shot game?

A)Both firms will earn 0
B)Firm A will earn 50 and firm B will earn -10
C)Firm A will earn -10 and firm B will earn 50
D)Both firms will earn 25

Question 22

Refer to the following normal form game of price competition for questions 20 - 23.

Suppose that Firm A deviates from a trigger strategy to support a high price.What is A's payoff from cheating?

A)0
B)50
C)-10
D)25

Question 23

In sequential games,

A)Players take turns,and each player observes what his or her rival did before having to move
B)Players take turns,but each player does not observe what his or her rival did before having to move
C)Players move at the same time
D)None of the above

Question 24

Refer to the following normal form game of price competition for questions 20 - 23.

Suppose the game is infinitely repeated.What strategies will each firm utilize?

A)Firm A will charge a lower price and firm B will charge a lower price
B)Firm A will charge a higher price and firm B will charge a lower price
C)Firm A will charge a lower price and firm B will charge a higher price
D)Firm A will charge a higher price and firm B will charge a higher price

Question 25

The implication of the prisoners' dilemma for a long-run strategy is for firms to

A)Do nothing
B)Differentiate your product that competitors cannot imitate
C)Figure a way to lower their costs
D)Both b and c