Question 1

Sealed bid construction contracts are examples of market games that are

Accepted Answer

A)  simultaneous and nonrepeated.
B)  simultaneous and repeated.
C)  sequential and nonrepeated.
D)  sequential and repeated. A

Question 2

Refer to Figure 9.2.What is the Nash equilibrium of this pricing game?

Accepted Answer

The only Nash equilibrium in this game is for General Electric to set a price of $2,000 and Westinghouse to set a price of $2,000.

Question 3

We have two players,A and B,where A moves first and can go L or R,and B moves next and can go T,B,or R.A moves again and can go L,R,or M.The payoffs are decided after this.The best approach to solve such games is through

Accepted Answer

A)  dominant strategies.
B)  mixed strategies.
C)  forward induction.
D)  backward induction. B

Question 4

Though Nash games are noncooperative,a cooperative outcome is more likely if

Accepted Answer

A)  the long-run gains are greater than the short-run gains.
B)  firms can easily monitor the outcomes from rivals' defection.
C)  firms expect the market relationship to last only for a short time.
D)  the long-run gains are smaller than the short-run gains.

Question 5

The process of looking at the final outcome and then reasoning back to initial decisions is called

Accepted Answer

A)  managerial decision making.
B)  simultaneous decision making.
C)  forward induction.
D)  backward induction.

Question 6

Which of the following statements is true?

Accepted Answer

A)  Every game has a dominant strategy.
B)  Not every game has a dominant strategy.
C)  Every game has multiple Nash equilibria.
D)  People never choose the strategies that result in Nash equilibrium.

Question 7

In the Battle of the Sexes game,Man likes to go to watch football,while Woman likes to go to the mall.Both of them would rather go together than go alone.They decide to show up to one of these places without contacting each other.A game like this will have

Accepted Answer

A)  a dominant strategy for Man and none for Women.
B)  one dominant strategy for both the players.
C)  no Nash equilibrium strategies.
D)  a Nash equilibrium in mixed strategies.

Question 8

Refer to Figure 9.4.The payoffs to each firm (in billions of dollars)and an extensive form game between BP and Shell are shown in the figure.BP has 20 percent of the U.S.gasoline market share and Shell has 16 percent market share.BP and Shell are attempting to determine whether to send geologists to explore Oil Track 20.  (a)Is there a dominant strategy for Shell? What is the dominant strategy,if any,for Shell?
(b)What is the Nash equilibrium or equilibria in this game?
(c)What is a first-mover advantage? Does BP have a first-mover advantage in this game?
(d)Use the above information to advise BP on whether they should pursue a merger with Shell.

Accepted Answer

The answer of Refer to Figure 9.4.The payoffs to each...

Question 9

We have two players A and B,where A can go L or R,and B can go T,B,or R.The payoffs are decided after this.Which of the following is a characteristic of such games?

Accepted Answer

A)  Dominant strategies
B)  Simultaneous moves
C)  Sequential moves
D)  Backward induction

Question 10

Higher discount rates imply that

Accepted Answer

A)  present payoffs are equal to the past payoffs.
B)  both present and future payoffs are equally unimportant.
C)  future payoffs are more important than present payoffs.
D)  present payoffs are more important than future payoffs.

Question 11

Repeated market interaction,particularly when there is no end to the interaction in sight,can

Accepted Answer

A)  change the dominant strategic equilibrium.
B)  not change the dominant strategic equilibrium.
C)  only change the equilibrium if the first mover changes.
D)  result in a mixed,secure strategy.

Question 12

Negotiations and binding contracts are not possible between rivals in

Accepted Answer

A)  noncooperative games.
B)  cooperative games.
C)  perfect competition
D)  single-firm monopolies.

Question 13

A dominant strategy is one where one firm picks

Accepted Answer

A)  a strategy only after seeing the other firm's decision.
B)  a strategy that must be repeated.
C)  a strategy no matter what the rival does.
D)  the same strategy as the rival.

Question 14

Though Nash games are noncooperative,a cooperative outcome is more likely if

Accepted Answer

A)  the long-run gains are smaller than the short-run gains.
B)  firms can easily monitor the outcomes from a rival's defection.
C)  firms expect the market relationship to last a long time.
D)  firms expect the market relationship to last only for a short time.

Question 15

What are the key managerial insights derived from game theory? Which one is the most important?

Accepted Answer

The answer of What are the key managerial insights derived...

Question 16

Risk-averse managers often select a secure strategy that provides the

Accepted Answer

A)  lowest payoff among the best payoffs.
B)  highest payoff among the best payoffs.
C)  lowest payoff among the worst payoffs.
D)  highest payoff among the worst payoffs.

Question 17

You toss two coins and if heads or tails shows up,then I take $1.If only one heads shows up,then you give me $1.We play this game many times.Who comes up ahead at the end of the day?

Accepted Answer

The answer of You toss two coins and if heads...

Question 18

As GMB and VolgaBus compete,GMB selects a new and superior brake technology.VolgaBus prefers a different brake technology,but feels trapped into selecting the same one used by GMB.This is due to

Accepted Answer

A)  adverse selection.
B)  first-mover advantage.
C)  secure strategy.
D)  extension form.

Question 19

As GMB moves to select a new passive restraint safety system for its buses,it finds that its competitor,VolgaBus,opposes the move with an alternative technology.GMB must now evaluate its strategy and determine whether

Accepted Answer

A)  VolgaBus's alternative is credible.
B)  GMB used the circle technique to arrive at its decision.
C)  the secure strategy is the best alternative.
D)  VolgaBus should really be the first mover.

Question 20

When there are large network effects of adopting a new technology,firms often feel that government regulation or joint ventures can solve the

Accepted Answer

A)  problem of excessive investment.
B)  coordination problem.
C)  problem of excess capacity.
D)  market inefficiency problem.

Exam 9: Economics of Strategy: Game Theory

Sealed bid construction contracts are examples of market games that are

Refer to Figure 9.2.What is the Nash equilibrium of this pricing game?

We have two players,A and B,where A moves first and can go L or R,and B moves next and can go T,B,or R.A moves again and can go L,R,or M.The payoffs are decided after this.The best approach to solve such games is through

Though Nash games are noncooperative,a cooperative outcome is more likely if

The process of looking at the final outcome and then reasoning back to initial decisions is called

Which of the following statements is true?

In the Battle of the Sexes game,Man likes to go to watch football,while Woman likes to go to the mall.Both of them would rather go together than go alone.They decide to show up to one of these places without contacting each other.A game like this will have

We have two players A and B,where A can go L or R,and B can go T,B,or R.The payoffs are decided after this.Which of the following is a characteristic of such games?

Higher discount rates imply that

Repeated market interaction,particularly when there is no end to the interaction in sight,can

Negotiations and binding contracts are not possible between rivals in

A dominant strategy is one where one firm picks

Though Nash games are noncooperative,a cooperative outcome is more likely if

What are the key managerial insights derived from game theory? Which one is the most important?

Risk-averse managers often select a secure strategy that provides the

You toss two coins and if heads or tails shows up,then I take $1.If only one heads shows up,then you give me $1.We play this game many times.Who comes up ahead at the end of the day?

As GMB and VolgaBus compete,GMB selects a new and superior brake technology.VolgaBus prefers a different brake technology,but feels trapped into selecting the same one used by GMB.This is due to

As GMB moves to select a new passive restraint safety system for its buses,it finds that its competitor,VolgaBus,opposes the move with an alternative technology.GMB must now evaluate its strategy and determine whether

When there are large network effects of adopting a new technology,firms often feel that government regulation or joint ventures can solve the