Deck 11: Game Theory and the Tools of Strategic Business Analysis

Question 1

A game of strategy is a multiperson decision problem in which an abstract set of rules constrains the behavior of players and defines outcomes on the basis of the actions taken by the players.

Answer 1

True

Question 2

A game in which, when any player makes a move, the player knows all the prior choices made by all the other players is called a game of

A) perfect information
B) prior information
C) imperfect information

Answer 2

perfect information

Question 3

A trigger strategy is a type of strategy in an infinite horizon repeated game where one deviation triggers an infinite punishment; also known as a grim strategy.

Answer 3

True

Question 4

A zero-sum game is a game in which the gain of one player equals the loss of the other player.

Question 5

A complete plan of action for the player that tells us what choice the player should make at any node of the game tree or in any situation that might arise during the play of the game is known as

A) pure strategy
B) normal strategy
C) extensive strategy

Question 6

A refinement concept places a set of extra constraints on a Nash equilibrium in order to select among multiple equilibria if they exist or to simply make the equilibrium more plausible.

Question 7

The sets that indicate what a player knows when it is the player's turn to make a move in a game tree are called information sets.

Question 8

A dominated strategy is a strategy that is dominated by another strategy.

Question 9

A visual depiction of an extensive form game that presents the rules and payoff contingencies of the game is called a game

A) theory
B) tree
C) strategy

Question 10

Strategy A dominates strategy B if it gives a higher payoff than B no matter what the opposing players do.

Question 11

Refer to Exhibit 11-1. This game is shown in

A) normal form
B) extensive form
C) game tree form

Question 12

A state in which no player will wish to change his or her behavior given the behavior of the other players is known as equilibrium.

Question 13

Extensive form is a

A) matrix showing the players, strategies, and payoffs of a game
B) long game with at least ten strategies and ten players
C) description of a game of strategy that provides a detailed description of the rules of the game

Question 14

A 2 × 2 matrix game in which each player has a dominant strategy determining an equilibrium that is Pareto dominated is called the

A) prisoner's dilemma game
B) second-auction game
C) centipede game

Question 15

A Nash equilibrium is a set of strategies, one for each player, in which _______________________ to change behavior given the behavior of the opponents.

A) no player wishes
B) all players wish
C) only one player wishes

Question 16

Backward induction is a description of a game of strategy that provides a detailed description of the rules of the game.

Question 17

The remaining portion of the game tree at a given node of the larger game is known as backward induction.

Question 18

A dominant strategy is ______________ for a player no matter what the opposing players do.

A) best
B) indifferent
C) worst

Question 19

A game in which, when any player reaches a decision point, the player does not know all the choices of the other players who preceded is called a game of

A) perfect information
B) imperfect information
C) zero information

Question 20

Noncooperative games ____________ possibility of communication or binding commitments.

A) have no
B) have some
C) require the

Question 21

Rational players should _______________ use a dominated strategy.

A) occasionally
B) always
C) never

Question 22

A two-person game in which player 1 divides an amount of money between the two players and the opponent either accepts or rejects the proposal is called a(n)

A) trigger game
B) ultimatum game
C) grim strategy game

Question 23

A threat in a strategic game that is not believable or would not be carried out if called upon is known as a(n)

A) noncredible threat
B) credible threat
C) incredible threat

Question 24

A mixed strategy equilibrium is where players use

A) mixed strategies
B) normal strategies
C) pure strategies

Question 25

Whenever a game arrives at a unique outcome using the strong or weak version of the iterative elimination of dominated strategies, we call the game

A) dominance-solvable
B) extensive
C) strictly dominated

Question 26

Strategies that define probability mixtures over all or some of the pure strategies in the game are called

A) mixed strategies
B) super-pure strategies
C) gambles

Question 27

If one player in a game uses a mixed strategy that leaves the other player with a unique pure strategy best response, a mixed strategy equilibrium ___________ exist.

A) does not
B) does
C) It is not possible answer without knowing the probabilities

Question 28

The equilibrium in a game in which all players use their dominant strategies is known as a

A) Nash equilibrium
B) dominant-strategy equilibrium
C) dominated-strategy equilibrium

Question 29

A threat that, if the game ever progresses to the point where the threat is supposed to be carried out will, in fact, be acted on is known as a(n)

A) noncredible threat
B) credible threat
C) incredible threat

Question 30

Explain how the traditional view of rationality and equity applies to game theory.

Question 31

The professor says to the student, "I have already told you ten times today not to text message during class. If I catch you doing it again, I will ask you to leave the classroom." In game theory terms, how would you describe the professor's statement?

Question 32

A set of strategies that constitute a Nash equilibrium, where the actions prescribed by these strategies for the players once they reach any subgame constitute a Nash equilibrium for that subgame is called a(n)

A) subgame perfect equilibrium
B) imperfect subgame equilibrium
C) backward equilibrium

Question 33

Distinguish between strict and weak domination.

Question 34

A game in which the players have a common interest in reaching an equilibrium yet, if there are multiple equilibria, their preferences may differ as to which is the best, is called a

A) mixed strategy
B) coordination game
C) noncooperative game

Question 35

What must the rules of a game of strategy specify?

Question 36

The expected __________ of a strategy is the probability-weighted __________ the player can expect to receive.

A) mixture, payoff
B) value, equilibrium
C) value, payoff

Question 37

The only situation in which a mixed strategy equilibrium arises is one where the mixed strategies chosen leave both players indifferent between the payoffs they expect to receive from their

A) pure strategies
B) extensive strategies
C) mixed strategies

Question 38

If strategy 1 weakly dominates strategy 2, which of the following must be true?

A) Strategy 1 is strictly better than strategy 2 when the opponent chooses strategy 1 and strictly better than strategy 2 when the opponent chooses strategy 2
B) Strategy 1 is just as good as strategy 2 when the opponent chooses strategy 1 and just as good as strategy 2 when the opponent chooses strategy 2
C) Strategy 1 is just as good as strategy 2 when the opponent chooses strategy 1 and strictly better than strategy 2 when the opponent chooses strategy 2

Question 39

To produce Nash equilibria in mixed strategy games, we must expand the definition of a strategy to include not only the choice of an action, but also the

A) names of the players
B) probability of credible threats
C) probability of the action being chosen