Question 1

One interesting feature of a prisoner's dilemma game is that

Accepted Answer

A)  non-cooperative behavior leads to lower payoffs than cooperative behavior. 
B)  it was only valid before the industrial revolution. 
C)  individuals behave irrationally when they behave non-cooperatively. 
D)  cooperative behavior leads to lower payoffs than non-cooperative behavior.

Question 2

If you take a maximum strategy

Accepted Answer

A)  you are irrational according to economic definition. 
B)  you are ensuring that the other player gets the worst possible outcome. 
C)  you are getting the best possible outcome given that the other player does the thing that's worst for you. 
D)  then both players are doing the best they can given the payoffs in the game.

Question 3

Mutually Assured Destruction was a standing policy during the Cold War,in which the United States and the U.S.S.R.maintained and expanded nuclear arsenals beyond practical levels.What could explain such a phenomenon?

Accepted Answer

A)  insane public officials who were bent on world domination 
B)  a prisoner's dilemma 
C)  a leader-follower type game 
D)  tacit collusion

Question 4

Which of the following statements is TRUE about a non-cooperative game?

Accepted Answer

A)  When two players each have a dominant strategy, joint profits may not be maximized. 
B)  When two players each have a dominant strategy, joint profits are maximized. 
C)  When players use their best responses, joint profits are maximized. 
D)  None of the above.

Question 5

If the payoff to the United States to pursuing nuclear weapons is 100 if the USSR does not pursue nuclear weapons and 50 if the USSR does,and the payoff to the USSR to pursuing nuclear weapons is 80 if the USA doesn't pursue nuclear weapons and 30 if the USA does,what is the non-cooperative equilibrium?

Accepted Answer

A)  The USA pursues nuclear weapons, the USSR does not. 
B)  The USA pursues nuclear weapons, the USSR pursues nuclear weapons. 
C)  The USA does not pursue nuclear weapons, the USSR does not pursue nuclear weapons. 
D)  The USA does not pursue nuclear weapons, the USSR does pursue nuclear weapons.

Question 6

In a second-price auction,the winner pays

Accepted Answer

A)  the second-to-last bid it made. 
B)  the average of the top two bids. 
C)  the amount bid by the runner-up. 
D)  None of the above.

Question 7

In a two-player simultaneous game,if player A has a dominant strategy and player B does not,player B will

Accepted Answer

A)  employ a mixed strategy. 
B)  choose his best strategy assuming that player A plays her dominant strategy. 
C)  not achieve a Nash equilibrium. 
D)  assume that player A does not choose her dominant strategy.

Question 8

The individual with the highest valuation of the good will win in which of the following auctions?

Accepted Answer

A)  English Auction 
B)  Dutch Auction 
C)  Sealed Bid Auction 
D)  All of the above.

Question 9

If a game has a pure strategy Nash equilibrium then

Accepted Answer

A)  it might also have a mixed strategy equilibrium. 
B)  it does not have a mixed strategy equilibrium. 
C)  at least one player has a dominant strategy. 
D)  no player has a dominant strategy.

Question 10

A private auction is an auction in which

Accepted Answer

A)  individuals know their own value of the good and everyone else's valuation, too. 
B)  individuals have their own valuation of the good but don't know everyone else's. 
C)  many auctions are auctioned off at the same time. 
D)  only one good is auctioned off.

Exam 12: Game Theory and Business Strategy