Question 1

Scenario 13.1:
You are negotiating with your florist over the price of flowers for your wedding. You value the floral arrangements at $500. The florist's cost for the arrangement is $200. You finally settled on a price of $250.
-Refer to Scenario 13.1. If your negotiated price had been $350 instead of $250, the sum of consumer surplus and producer surplus would be:

Accepted Answer

A)  less than what would have accrued at the $250 price. 
B)  the same as what would have accrued at the $250 price. 
C)  more than what would have accrued at the $250 price. 
D)  None of the above is necessarily correct.

Question 2

The two largest auto manufacturers, Toyota and GM, have experimented with hydrogen powered cars in the past, and they are currently considering the decision to introduce a hydrogen powered car into the commercial automobile market. The payoffs from the possible actions are measured in millions of dollars per year, and the possible outcomes are summarized in the following game matrix:

If both firms enter the market simultaneously, what is the Nash equilibrium?

Accepted Answer

A)  Toyota produces and GM does not produce. 
B)  GM produces and Toyota does not produce. 
C)  There are two Nash equilibria - GM produces and Toyota does not produce, or Toyota produces and GM does not produce. 
D)  There is no Nash equilibrium in this game.

Question 3

Scenario 13.16
Consider the pricing game below: 
-Refer to Scenario 13.16. If the firms must choose their prices simultaneously,

Accepted Answer

A)  both firms will buy gelato. 
B)  both firms will buy yogurt. 
C)  two pure strategy equilibria exist, one in which Gooi alone buys a gelato machine and one in which Ici alone buys a gelato machine. 
D)  the game has no pure strategy equilibrium. 
E)  the game has no mixed strategy equilibrium.

Question 4

Use the following statements to answer this question:
I. A player must have at least one dominant strategy in a game.
II. If neither player in a game has a dominant strategy in a game, then there is no equilibrium outcome for the game.

Accepted Answer

A)  I and II are true. 
B)  I is true and II is false. 
C)  II is true and I is false. 
D)  I and II are false.

Question 5

Joanna has a credit card account with Card Bank. Card Bank's available strategies are tp raise Joanna's credit card interest rate or do nothing. Joanna's available strategies are to transfer her Card Bank account balance to another creditor or do nothing. If Card Bank raises Joanna's interest rate and Joanna does nothing, Card Bank increases profits by $1,000 while Joanna receives -$1,000. If Card Bank raises Joanna's interest rate and Joanna transfers her account to another creditor, Card Bank receives -$300 while Joanna receives -$100. If Card Bank does nothing and Joanna does nothing, each player receives $0. If Card Bank does nothing and Joanna transfers her account to another creditor, Card Bank receives -$300 while Joanna receives -$150. Diagram the game tree for this sequential game. Indicate any Nash equilibria.

Accepted Answer

The answer of Joanna has a credit card account with...

Question 6

Scenario 13.1:
You are negotiating with your florist over the price of flowers for your wedding. You value the floral arrangements at $500. The florist's cost for the arrangement is $200. You finally settled on a price of $250.
-Refer to Scenario 13.1. At your negotiated price your consumer surplus is:

Accepted Answer

A)  $50. 
B)  $200. 
C)  $250. 
D)  $300.

Question 7

A Nash equilibrium occurs when

Accepted Answer

A)  each firm is doing the best it can given its opponents' actions. 
B)  each firm chooses the strategy that maximizes its minimum gain. 
C)  a player can choose a strategy that is optimal regardless of its rivals' actions. 
D)  there is no dominant firm in a market.

Question 8

BuyRight is a chain of grocery stores operating in small cities throughout the southwestern United States. BuyRight's major competition comes from another chain, Acme Food Stores. Both firms are currently contemplating their advertising strategy for the region. The possible outcomes are illustrated by the payoff matrix below.  
Entries in the payoff matrix are profits. BuyRight's profit is before the comma, Acme's is after the comma.
a. Describe what is meant by a dominant strategy.
b. Given the payoff matrix above, does each firm have a dominant strategy?
c. Under what circumstances would there be no dominant strategy for one or both firms?

Accepted Answer

The answer of BuyRight is a chain of grocery stores...

Question 9

Some popular reality television programs follow people who buy the contents of abandoned storage lockers at public auctions. In most cases, several storeage lockers are sold in sequence during a particular auction. Occassionally, one of the buyers will purposefully bid much more than the expected value of a particular storage locker in order to intimidate the other bidders. What is a plausible explanation for these excessive bids?

Accepted Answer

A)  The buyer is trying to establish a reputation that may affect the outcome of later auctions. 
B)  The excessive bids may be rational if they occur during the last auction of the day. 
C)  The bidder is trying to establish a first-mover advantage, but only if they occur during the first auction of the day. 
D)  The excessive bids represent a form of tacit collusion among the buyers.

Question 10

Consider the following game that represents the payoffs from different advertising campaigns (low, medium, and high spending) for two political candidates that are running for a particular office. The values in the payoff matrix represent the share of the popular vote earned by each candidate:

Under the version of the game in which Candidate A moves first, what is the Nash equilibrium?

Accepted Answer

A)  The Nash equilibrium occurs where both candidates use medium advertising campaigns. 
B)  Candidate A's strategy is low, and Candidate B responsed with a high advertising campaign. 
C)  The Nash equilibrium for the sequential and simultaneous versions of the game are identical. 
D)  There is no Nash equilibrium (in pure strategies) for this sequential game.

Question 11

A dominant strategy can best be described as

Accepted Answer

A)  a strategy taken by a dominant firm. 
B)  the strategy taken by a firm in order to dominate its rivals. 
C)  a strategy that is optimal for a player no matter what an opponent does. 
D)  a strategy that leaves every player in a game better off. 
E)  all of the above

Question 12

Scenario 13.11
Consider the game below: 
-What is true about dominant strategies in the game in Scenario 13.11?

Accepted Answer

A)  R1 and C1 are dominant strategies. 
B)  R1 and C2 are dominant strategies. 
C)  R2 and C1 are dominant strategies. 
D)  R2 and C2 are dominant strategies. 
E)  There are no dominant strategies.

Question 13

Consider the Matching Pennies game:

Suppose Player A always uses a pure strategy that selects heads, and Player B always uses a pure strategy that selects tails. Is this outcome a Nash equilibrium?

Accepted Answer

A)  Yes, both players have no incentive to change their actions. 
B)  No, Player A would want to switch to tails. 
C)  No, Player B would want to switch to heads. 
D)  No, Player B would want to switch to tails.

Question 14

The strategy that worked best in Axelrod's experiments using the Prisoners' Dilemma game was to

Accepted Answer

A)  play the "cooperate" ("don't confess") strategy. 
B)  play the "defect" ("confess") strategy. 
C)  alternate between "cooperate" and "defect" strategies. 
D)  play the "cooperate" strategy at first, and from then on do whatever the other player did in the previous round, cooperating if the other player did, and defecting if the other player did. 
E)  play the "cooperate" strategy in the first round, and from then on cooperate so long as the other player does, but if the other player defects, then play the "defect" strategy from that time forward.

Question 15

What is true of equilibrium in the game in Scenario 13.14?

Accepted Answer

A)  In equilibrium, both firms choose Q = 50. 
B)  In equilibrium, both firms choose Q = 100. 
C)  There are two equilibria, at Q = 50 and at Q = 100. 
D)  The only equilibrium is in mixed strategies. 
E)  The two equilibria are those associated with the (40,30) outcome and the (30,40) outcome.

Question 16

Consider the following game that represents the payoffs from different advertising campaigns (low, medium, and high spending) for two political candidates that are running for a particular office. The values in the payoff matrix represent the share of the popular vote earned by each candidate:

Under the version of the game with simultaneous moves, what is the Nash equilibrium?

Accepted Answer

A)  Neither candidate has a dominant strategy, but the Nash equilibrium occurs where both candidates use medium advertising campaigns. 
B)  Candidate A's dominant strategy is high, Candidate B's dominant strategy is high, and this is the Nash equilibrium. 
C)  Neither candidate has a dominant strategy, but the Nash equilibrium occurs where both candidates use high advertising campaigns. 
D)  There is no Nash equilibrium (in pure strategies) for this simultaneous game.

Question 17

Consider the following game in which two firms decide how much of a homogeneous good to produce. The annual profit payoffs for each firm are stated in the cell of the game matrix, and Firm A's payoffs appear first in the payoff pairs:

What are the dominant strategies in this game?

Accepted Answer

A)  Both firms produce low levels of output 
B)  Both firms produce high levels of output 
C)  Firm A's dominant strategy is to produce low levels of output, but Firm B does not have a dominant strategy. 
D)  Firm B's dominant strategy is to produce low levels of output, but Firm A does not have a dominant strategy. 
E)  Neither firm has a dominant strategy

Question 18

Scenario 13.11
Consider the game below: 
-What kind of game is shown in Scenario 13.11?

Accepted Answer

A)  Axelrod's Paradox 
B)  Stackelberg Match 
C)  Prisoners' Dilemma 
D)  Cournot's Duopoly Game 
E)  It is not possible to tell what kind of game it is because the strategies have not been identified.

Question 19

Scenario 13.3
Consider the following game: 
-Which of the following is true for the game in Scenario 13.3?

Accepted Answer

A)  Moto's dominant strategy is the CD changer. 
B)  Moto's dominant strategy is the free maintenance. 
C)  Zport's dominant strategy is the low-profile tires. 
D)  Zport's dominant strategy is the sun roof. 
E)  Neither company has a dominant strategy.

Question 20

The two largest auto manufacturers, Toyota and GM, have experimented with hydrogen powered cars in the past, and they are currently considering the decision to introduce a hydrogen powered car into the commercial automobile market. The payoffs from the possible actions are measured in millions of dollars per year, and the possible outcomes are summarized in the following game matrix:

Suppose the Japanese government provides a $15 million subsidy to Toyota if the company delivers a hydrogen powered auto (regardless of GM's action). What is the Nash equilibrium based on the subsidized payoffs?

Accepted Answer

A)  Toyota's dominant strategy is to produce, and GM is deterred and does not produce. 
B)  Toyota's dominant strategy is to produce, and GM also produces the electric auto. 
C)  The outcome of the game is the same as before, and there are two Nash equilibria - GM produces and Toyota does not produce, or Toyota produces and GM does not produce. 
D)  There is no Nash equilibrium in this game.

Exam 13: Game Theory and Competitive Strategy

Scenario 13.16 Consider the pricing game below: -Refer to Scenario 13.16. If the firms must choose their prices simultaneously,

Use the following statements to answer this question: I. A player must have at least one dominant strategy in a game. II. If neither player in a game has a dominant strategy in a game, then there is no equilibrium outcome for the game.

A Nash equilibrium occurs when

A dominant strategy can best be described as

Scenario 13.11 Consider the game below: -What is true about dominant strategies in the game in Scenario 13.11?

Consider the Matching Pennies game: Suppose Player A always uses a pure strategy that selects heads, and Player B always uses a pure strategy that selects tails. Is this outcome a Nash equilibrium?

The strategy that worked best in Axelrod's experiments using the Prisoners' Dilemma game was to

What is true of equilibrium in the game in Scenario 13.14?

Consider the following game in which two firms decide how much of a homogeneous good to produce. The annual profit payoffs for each firm are stated in the cell of the game matrix, and Firm A's payoffs appear first in the payoff pairs: What are the dominant strategies in this game?

Scenario 13.11 Consider the game below: -What kind of game is shown in Scenario 13.11?

Scenario 13.3 Consider the following game: -Which of the following is true for the game in Scenario 13.3?