Question 1

What term describes a policy in which a firm is prepared to match whatever change in strategy a competitor makes?

Accepted Answer

A) Response strategy 
B) Always cooperate strategy 
C) Always aggress strategy 
D) Tit-for-tat strategy 
E) Trigger strategy

Question 2

Suppose a firm has $50 million to invest in a new market.Given market uncertainties,the firm forecasts a high-scenario where the present value of the investment is $200 million and a low-scenario where the present value of the investment is $20 million.If the firm believes each scenario is equally likely and invests today,what is the net present value of the investment?

Accepted Answer

The answer of Suppose a firm has $50 million to...

Question 3

What type of pricing involves a firm quoting a single delivered price for all buyers with the firm absorbing any freight charges itself?

Accepted Answer

A) Uniform delivered pricing 
B) Uniform FOB pricing 
C) Uniform customer pricing 
D) Uniform favored pricing 
E) Uniform competitive pricing

Question 4

Suppose Firm #1 dominates a market for widgets priced at $100/unit with a marginal cost of $60/unit.If Firm #2 enters the market and offers comparable widgets at a 3% discount,extending a price umbrella optimal as long as Firm #1 loses no more than what portion of its market share?

Accepted Answer

The answer of Suppose Firm #1 dominates a market for...

Question 5

What type of effect describes how a commitment impacts the present value of the firm's profits,assuming the firm adjusts its own tactical decisions in light of this commitment and that its competitor's behavior does not change?

Accepted Answer

A) Tactical effect 
B) Financial effect 
C) Direct effect 
D) Strategic effect 
E) Indirect effect

Question 6

What term refers to situations in which firms can sustain prices in excess of those that would arise in a non-cooperative single-shot price or quantity-setting game?

Accepted Answer

A) Dedicated pricing 
B) Strategic pricing 
C) Marginal pricing 
D) Cost-plus pricing 
E) Cooperative pricing

Question 7

Suppose a firm has $50 million to invest in a new market.Given market uncertainties,the firm forecasts a high-scenario where the present value of the investment is $200 million and a low-scenario where the present value of the investment is $20 million.Suppose that by waiting a year,the firm can learn with certainty which scenario will arise.Assume a 10% annual discount rate.If the firm waits one year and learns that the high-scenario will happen,what is the firm's expected net present value of the investment?

Accepted Answer

The answer of Suppose a firm has $50 million to...

Question 8

Given the following payoff diagram:  How much can firm 1 improve its outcome by committing to a strategy thus transforming the simultaneous move game to a sequential move game?

Accepted Answer

A) 5 
B) 10 
C) 15 
D) 20

Question 9

Why do price-sensitive buyers tend to harm cooperative pricing in a market?

Accepted Answer

A) They cause an increase in detection lags because competitor prices become more difficult to monitor 
B) There is a resultant decrease in the frequency of interaction between competitors 
C) There is an increase in the probability of misreads 
D) The is an increase in temptation to cut price,even if competitors are expected to match 
E) There is an increase in detection lags because prices of competitors are more difficult to monitor

Question 10

Which of the following statements is true about a soft commitment?

Accepted Answer

A) It is bad for competitors 
B) It is good for competitors 
C) In Cournot competition,capacity expansion is an example of a soft commitment 
D) In Betrand competition,a commitment to reduce prices is an example of a soft commitment 
E) Tough commitments are always in the best interest of a firm

Question 11

Which of the following statements is true about how the volatility of demand conditions affects the sustainability of cooperative pricing?

Accepted Answer

A) Price cutting is easier to detect when demand conditions are volatile 
B) Pricing coordination becomes easier in a volatile demand condition because firms are chasing a moving target 
C) Price cutting is harder to detect when demand conditions are stable 
D) Demand volatility is an especially serious problem when the production involves substantial variable costs 
E) Demand volatility is an especially serious problem when the production involves substantial fixed costs

Question 12

Which of the following commitment strategies involves soft commitment postures,strategic complements for the stage 2 tactical variables,a refrain commitment action and an acceptance of the status quo out of fear thus waiting to follow the leader?

Accepted Answer

A) Top Dog 
B) Lean and Hungry Look 
C) Mad Dog 
D) Puppy-Dog Ploy 
E) Fat-Cat Effect

Question 13

Which of the following best describes a tit-for-tat strategy?

Accepted Answer

A) A firm charges a fixed price to every customer 
B) A firm is prepared to match whatever change in strategy a competitor makes 
C) A firm offers discounts for purchasing in quantity 
D) A firm requires customers to enter into long-term purchase contracts 
E) None of the above

Exam 7: The Dynamics Competing Across Time