Deck 9: Game Theory and Strategic Thinking

Question 1

In real life,people's behavior is constrained by:

A)laws of nature.
B)legislated rules of society.
C)laws that define industry structure.
D)All of these are rules that constrain people's behavior.

Answer 1

All of these are rules that constrain people's behavior.

Question 2

Behaving strategically:

A)means recognizing that the actions of others will affect the trade-offs you face,and acting accordingly.
B)is an essential part of game theory.
C)involves rational decision making.
D)All of these statements are true.

Answer 2

All of these statements are true.

Question 3

While everyone wants a clean environment,it can be very hard to achieve.An approach governments could take to ensure we get that outcome is:

A)create social norms.
B)create and enforce strict laws and heavy fines.
C)influence individual's incentives.
D)All of these are ways governments get the "green" behavior we want.

Answer 3

All of these are ways governments get the "green" behavior we want.

Question 4

To economists,games are:

A)any situation in which players pursue strategies designed to achieve their goals.
B)a trivial pursuit,and should not be used to analyze the economy or its actors.
C)a way to simplify and minimize the true importance of situations like war.
D)All of these statements are true.

Question 5

When your outcomes depend on another's choices,asking __________________ is the key to good decision making.

A)how will others respond
B)what the wants and constraints are of those involved
C)what the trade-offs are
D)why everyone isn't already doing it

Question 6

All games involve which of the following?

A)Strategies
B)A clear outcome
C)Cards or dice
D)Full information

Question 7

In games,rules:

A)define the actions that are allowed in a game.
B)need to be loosely adhered to in order to predict an outcome.
C)define the winners of a game.
D)outline the wrong choices that could be made in a game.

Question 8

An example of a real-life rule that might constrain our behavior is:

A)the cost structure a business faces.
B)the social norms around what people wear in public.
C)the laws in place protecting our environment.
D)All of these are examples of real-life rules.

Question 9

All games involve which of the following?

A)Rules
B)Strategies
C)Payoffs
D)All games involve all of these things.

Question 10

When the trade-offs you face are determined by the choices someone else will make,behaving rationally involves:

A)behaving strategically.
B)taking into consideration the actions of others.
C)acting in your own self-interest.
D)All of these statements are true.

Question 11

An example of a real-life rule that might constrain people's behavior is:

A)minimum wage legislation.
B)having 24 hours in a day.
C)the earth's limited supply of oil.
D)All of these are examples of real-life rules.

Question 12

All games involve which of the following?

A)Payoffs
B)A predictable outcome
C)Full information
D)A game master

Question 13

The prisoner's dilemma is a game of strategy:

A)in which people make rational choices that lead to a less-than-ideal result for all.
B)in which people make rational choices that lead to the ideal result for all.
C)that leads everyone to be as well off as possible without making another worse off.
D)that leads people to make irrational choices that lead to the ideal result for all.

Question 14

Behaving strategically means:

A)acting to achieve a goal by anticipating the interplay between your own and others' decisions.
B)evaluating decisions in which actors act in their own self-interest,and the interplay of those decisions does not exist.
C)acting to achieve a goal by withholding key information from the person with whom an exchange is being made.
D)evaluating the impact of your choices on a third party.

Question 15

Game theory is:

A)the study of how people behave strategically under different circumstances.
B)used by economists to evaluate behavior in a variety of settings.
C)a useful tool in predicting strategic behavior.
D)All of these statements are true.

Question 16

The study of how people behave strategically under different circumstances is called:

A)game theory.
B)game strategy.
C)strategy optimization.
D)strategy theory.

Question 17

Game theory is:

A)the study of how people behave strategically under different circumstances.
B)used to predict the winners of only certain types of strategic games.
C)used to evaluate the microeconomic choices that involve probabilities of different behaviors.
D)the study of how people behave when playing a game involving odds,like horse racing.

Question 18

To economists,games are:

A)not just recreational pursuits like chess,Monopoly,or poker.
B)any situation in which players pursue strategies designed to achieve their goals.
C)can be a useful model when trying to predict the outcome to a variety of situations,from the environment to war.
D)All of these statements are true.

Question 19

Economic games can be used to analyze decisions around which of the following situations?

A)War
B)Business
C)Environmental protection
D)Economic games can be used to analyze all of these.

Question 20

All games involve which of the following?

A)Rules
B)A board
C)Dice
D)Cards

Question 21

In the prisoner's dilemma game:

A)a stable outcome is possible.
B)a stable outcome is impossible.
C)only one player has a dominant strategy.
D)a commitment strategy is needed to reach a stable outcome.

Question 22

In games,strategies are:

A)the plans of action that players follow to achieve their goals.
B)the different sets of actions that players could follow during a game.
C)the same for everyone to achieve the same goal.
D)All of these statements are true.

Question 23

An example of a payoff would be:

A)a salary.
B)winning an election.
C)having clean drinking water.
D)All of these are examples of payoffs.

Question 24

When a strategy is the best one to follow no matter what strategy other players choose,it is called a:

A)dominant strategy.
B)golden decision.
C)optimizing strategy.
D)zero-sum strategy.

Question 25

A decision matrix:

A)summarizes the choices and payoffs associated with the prisoner's dilemma game.
B)outlines the clear outcome of any strategy-based game.
C)shows only the decisions of one player.
D)cannot be useful in evaluating the strategy choices.

Question 26

In the prisoner's dilemma game:

A)a cooperative strategy can lead to a more beneficial outcome for both players.
B)a noncooperative strategy will lead to a positive-positive outcome.
C)a stable outcome is impossible.
D)neither player has a dominant strategy.

Question 27

In game theory,an example of a payoff would be:

A)a bribe.
B)sharing information with a select few that others aren't privy to.
C)winning the lottery.
D)giving an advantage to only one player.

Question 28

In the prisoner's dilemma game:

A)a negative-negative outcome can be predicted.
B)a dominant strategy exists for both players.
C)a noncooperative equilibrium can be predicted.
D)All of these statements are true.

Question 29

In the prisoner's dilemma:

A)a negative-negative outcome can be predicted.
B)a dominant strategy exists for only one player.
C)a cooperative equilibrium can be predicted.
D)All of these statements are true.

Question 30

In games:

A)there is only one strategy associated with each outcome desired.
B)there are several strategies that can achieve a single,desired goal.
C)all strategies followed in one particular game should all be similar to be successful.
D)if one person's strategy is wildly different,he will typically come in first or last.

Question 31

The prisoner's dilemma:

A)can be summarized in a payoff matrix.
B)can involve two players.
C)leads to a less-than-ideal outcome for all players.
D)All of these statements are true.

Question 32

Payoffs are:

A)the rewards that come from particular actions.
B)always monetary.
C)only get enjoyed by the winner.
D)payments made to gain some advantage unfairly during a game.

Question 33

A noncooperative equilibrium is one in which:

A)the participants act independently,pursuing only their individual interests.
B)always results in a negative-negative outcome.
C)will only be reached if a dominant strategy exists for both players.
D)All of these statements are true.

Question 34

The prisoner's dilemma game can involve:

A)only two players.
B)more than two players.
C)organizations.
D)All of these statements are true.

Question 35

A dominant strategy:

A)is the best one to follow no matter what strategy other players choose.
B)exists in every game.
C)is always the same for all players of a game.
D)All of these statements are true.

Question 36

In games,the strategy to reach a particular goal:

A)is the same for everyone.
B)can be different and still achieve the same goal.
C)should be similar to what others have chosen to reach the same goal.
D)has begun to be documented by economists.

Question 37

In the prisoner's dilemma game:

A)there is a dominant strategy for both players.
B)there is a dominant strategy for only one player.
C)there is no dominant strategy for either player.
D)there may not be a dominant strategy for either player.

Question 38

In the prisoner's dilemma game:

A)neither player has a dominant strategy.
B)both players have a dominant strategy.
C)only one player will ever have a dominant strategy.
D)All of these may be true in a prisoner's dilemma game.

Question 39

The prisoner's dilemma can be summarized in:

A)a strategy matrix.
B)a strategy tree.
C)a decision matrix.
D)a flowchart.

Question 40

A dominant strategy is one:

A)that is the best one to follow,no matter what strategy other players choose.
B)in which a player is forced to choose given the rules of the game.
C)in which a player must choose,even though it does not optimize his outcome.
D)that is best to follow only for certain strategy choices of rivals.

Question 41

A commitment strategy is an agreement in which players agree to:

A)submit to a penalty in the future if they defect from a given strategy.
B)cooperate before the game begins.
C)cooperate in repeated games until someone defects.
D)None of these is a definition of a commitment strategy.

Question 42

Games:

A)only have one outcome possible.
B)with noncooperative equilibriums are always negative-negative outcomes.
C)may have several stable outcomes.
D)must have a dominant strategy present to reach a stable equilibrium.

Question 43

Games:

A)don't need a dominant strategy present in order to reach an equilibrium outcome.
B)may have noncooperative equilibriums that are positive-positive outcomes.
C)may have several stable outcomes.
D)All of these statements are true.

Question 44

Reaching a Nash equilibrium means that:

A)the players have reached a stable outcome where neither of you would wish to change your strategy once you find out what the other player is doing.
B)the outcome will be positive-positive.
C)a cooperative equilibrium has been reached.
D)the players have failed to reach a stable outcome because one player will always wish to change his strategy once he finds out what the other player is doing.

Question 45

When all players in a game choose the best strategy they can,given the choices of all other players,it is always a:

A)Nash equilibrium.
B)positive-positive outcome.
C)noncooperative equilibrium.
D)negative-negative equilibrium.

Question 46

For a commitment strategy to work:

A)the punishment must be so bad that it outweighs the incentive to defect in the game.
B)the punishment must be immediately after the game is played.
C)both players must agree to a punishment.
D)no player may have a dominant strategy.

Question 47

Cooperation in prisoner's dilemma-type games:

A)always benefits the players and the public.
B)always benefits the players,but does not always benefit the public.
C)doesn't always benefit the players,but always benefits the public.
D)doesn't always benefit the players or the public.

Question 48

A commitment strategy can:

A)be used to change people's payoffs to gain cooperation.
B)allow players to reach a mutually beneficial equilibrium that would otherwise be difficult to maintain.
C)result in a positive-positive outcome.
D)All of these statements are true.

Question 49

The players of prisoner's dilemma-type games:

A)would be much better off if they could cooperate.
B)have an incentive to never cooperate.
C)have a dominant strategy to never cooperate.
D)All of these statements are true.

Question 50

Games with a noncooperative equilibrium:

A)always result in a negative-negative outcome.
B)always result in a positive-positive outcome.
C)can result in either a positive-positive or negative-negative outcome.
D)always result in a positive-negative outcome (zero-sum).

Question 51

Once a Nash equilibrium has been found in a game:

A)a stable outcome is impossible.
B)the players have no incentive to change their choice.
C)the players always have an incentive to change their choice.
D)no one in the game can be made better off.

Question 52

If there is no one strategy that is best every time:

A)there is no dominant strategy.
B)the dominant strategy will be to defect.
C)a noncooperative equilibrium is the only possible outcome.
D)the dominant strategy for at least one player will be to cooperate.

Question 53

Games that don't have a dominant strategy present:

A)do not have stable equilibrium outcomes.
B)may have stable equilibrium outcomes.
C)always have stable equilibrium outcomes.
D)don't exist;all games have at least one dominant strategy.

Question 54

Games with a negative-negative outcome:

A)must have a noncooperative equilibrium.
B)are not necessarily the best outcome for the players involved.
C)result from players acting in their own self-interest.
D)All of these statements are true.

Question 55

A Nash equilibrium:

A)is reached when all players choose the best strategy they can,given the choices of all other players.
B)is a point in a game when no player has an incentive to change his or her strategy,given what the other players are doing.
C)is a concept named after the famous game theorist John Nash.
D)All of these statements are true.

Question 56

Having a commitment strategy in the business world is called:

A)collusion.
B)competitive cooperation.
C)predatory pricing.
D)competition.

Question 57

Cooperative equilibriums:

A)are impossible to reach in real life.
B)never occur unless players act in their own self-interest.
C)None of these statements is true.
D)never result in positive-positive outcomes.

Question 58

Games:

A)only have one possible stable outcome.
B)may have noncooperative equilibriums that are positive-positive outcomes.
C)must have a dominant strategy present in order to reach an equilibrium.
D)None of these statements is true.

Question 59

Reaching a Nash equilibrium means that:

A)a stable outcome has been reached.
B)there is no stable outcome to the game.
C)the players will never reach a positive-positive outcome.
D)None of these statements is true.

Question 60

Reaching a positive-positive outcome through a commitment strategy:

A)can benefit everyone.
B)will only benefit the players and will not serve public interest.
C)will not benefit anyone.
D)will always benefit everyone.

Question 61

The tit-for-tat strategy is:

A)one in which a player in a repeated game takes the same action that his or her opponent did in the preceding round.
B)one in which both players explicitly agree to compete in the first round of a repeated game,and if one of them cooperates,the other will defect.
C)not effective in prisoner's dilemma type games.
D)All of these statements are true.

Question 62

In repeated games:

A)a cooperative outcome is more likely than in a single game.
B)a noncooperative outcome is more likely than in a single game.
C)cooperation never happens.
D)players always cooperate and enjoy a mutually beneficial equilibrium.

Question 63

Collusion is when businesses:

A)agree to cooperate,and their behavior does not serve public interest.
B)agree to cooperate,and the U.S.government works hard to encourage this behavior.
C)have noncooperative outcomes,because they compete outside the public eye.
D)act in their own self-interest and ignore what the other businesses are doing.

Question 64

Collusion:

A)occurs only when no dominant strategy is present.
B)can occur when dominant strategies are present for both players.
C)is observed,but economists cannot theoretically model it.
D)is a theoretical concept that is rarely observed.

Question 65

Economists call a game that is played more than once:

A)a repeated game.
B)collusion.
C)a commitment strategy.
D)cooperative price play.

Question 66

If one player defects in a repeated game,and his opponent is following a tit-for-tat strategy,we can predict the opponent will:

A)defect in the next round.
B)quit the game.
C)cooperate and try to get his opponent to follow.
D)collude.

Question 67

Strategies and incentives:

A)often work quite differently when games are repeated.
B)work the same whether games are played once or repeated.
C)do not change when the game is repeated.
D)None of these statements is true.

Question 68

When one person or company has to make a decision before the other in a game,it is called a:

A)sequential game.
B)commitment strategy.
C)simultaneous game.
D)prisoner's dilemma.

Question 69

Collusion:

A)is a common problem in reality.
B)rarely occurs in reality.
C)never occurs in reality.
D)has not occurred in the last hundred years or so,due to government policy outlawing it.

Question 70

Commitment strategies:

A)are not necessary to reach a mutually beneficial equilibrium in repeated games.
B)are often needed to reach a mutually beneficial equilibrium in single-round games.
C)usually fail to work.
D)are not observed in reality.

Question 71

For players in a repeated-play game to achieve cooperation:

A)there is no need to enter into public commitment strategies or explicit agreements.
B)the players must reach an explicit agreement to cooperate.
C)the players need not explicitly state an agreement to cooperate,but must publicly display a commitment strategy.
D)None of these statements is true.

Question 72

The tit-for-tat strategy:

A)is common in repeated games.
B)is never used in single-round games.
C)can result in players' maintaining cooperation.
D)All of these statements are true.

Question 73

A key to gaining cooperative behavior in a repeated game is:

A)it must be repeated indefinitely.
B)there must be a definitive end to the game.
C)the players must commit to always acting in their own self-interest.
D)at least one player must have a dominant strategy.

Question 74

Two players who are both playing tit-for-tat can quickly find their way toward:

A)lasting cooperation.
B)noncooperative outcomes for the remaining rounds.
C)a cycle of cooperation and noncooperation,similar to a business cycle.
D)None of these statements is true.

Question 75

In repeated games:

A)players no longer need commitment strategies to reach a mutually beneficial equilibrium.
B)players will never reach a mutually beneficial equilibrium.
C)there are no dominant strategies.
D)negative-negative outcomes are the only outcomes possible.

Question 76

If each player responds by imitating the action of his opponent in the previous round of a repeating game,the players are following a:

A)tit-for-tat strategy.
B)repeated cooperation agreement.
C)collusion plan.
D)commitment strategy.

Question 77

Explicit agreements between businesses to keep prices high:

A)are illegal.
B)are called collusion.
C)are not in the public's best interests.
D)All of these statements are true.

Question 78

When businesses cooperate and agree to hold prices high,it is called ____________,and when they reach a noncooperative equilibrium it's called _______________.

A)collusion;competition
B)competition;collusion
C)commitment strategy;collusion
D)collusion;commitment strategy

Question 79

If you are following a tit-for-tat strategy in a repeated game,and your opponent makes a cooperative move,you will:

A)make a cooperative move in the next round.
B)collude.
C)price compete.
D)defect.

Question 80

Which of the following is a subtle way for a company to reassure their competitors that they are committed to a tit-for-tat strategy?

A)Price matching guarantees
B)Setting prices below cost
C)Collusion
D)Offering a commitment strategy