Question 1

Scenario 13.6
Consider the following game. Payoffs are in millions of dollars. 
-Refer to the game in Scenario 13.6. What will occur if ERS Co. plays a maximin strategy?

Accepted Answer

A)   -$100, -$1
B)   $2, -$0.5
C)   $1, -$1
D)   -$0.5, -$0.5
E)   There is a 0.25 chance of each outcome in that case.

Question 2

Two firms in a local market compete in the manufacture of cyberwidgets. Each firm must decide if they will engage in product research to innovate their version of the cyberwidget. The payoffs of each firm's strategy are a function of the strategy of their competitor as well. The payoff matrix is presented below.  Does either player have a dominant strategy? Does the game have any Nash equilibria? What is the maximin strategy of each player in the game?

Accepted Answer

Neither player has a dominant strategy i...

Question 3

In a two-person bargaining situation it is:

Accepted Answer

A)   always in the best interests of both players for each player to be as flexible as possible, and to have as many options as possible.
B)   always in the best interest of the player that moves first to be as flexible as possible, and to have as many options as possible.
C)   often in the best interest of players to pretend a game is noncooperative when it is not, and vice versa.
D)   often in the best interest of players to cut off some of their own options in order to make the other player's threats not credible.
E)   often in the best interest of players to cut off some of their own options in order to make their own threats credible.

Question 4

Your firm needs a private investigator and the best private eye in Santa Teresa is Kinsey Milhone. Her services are worth $30,000 to your firm but you do not want to pay her more than $10,000. You tell Kinsey that you cannot pay her more than $10,000 unless you get prior approval from the Board of Directors of your company, and, unfortunately, they just met and won't meet again for 6 months. This strategic move on your part gives you ________ flexibility and ________ bargaining power.

Accepted Answer

A)   less; less
B)   less; more
C)   more; less
D)   more; more

Question 5

Repetition of a game:

Accepted Answer

A)   yields the same outcome, over and over.
B)   can result in behavior that is different from what it would be if the game were played only once.
C)   is not possible.
D)   makes cooperative games into non-cooperative games.
E)   is possible only if the payoffs in the matrix change.

Question 6

Scenario 13.5
Consider the following game: 
-In the game in Scenario 13.5,

Accepted Answer

A)   there is one equilibrium: for both to expand West.
B)   there is one equilibrium: for both to expand South.
C)   there are two equilibria: either can expand in the West, and the other expands in the South.
D)   there is only a mixed strategies equilibrium.
E)   all four outcomes are equilibria.

Question 7

Suppose a player in a game has a dominant strategy, but they threaten to take another action. Can this threat be credible?

Accepted Answer

A)   No, such threats are never credible to other rational players.
B)   No, if the player has a dominant strategy, they must take this action.
C)   Yes, if they can link the current game to another bargaining problem in which their joint strategy for the combined games is rational.
D)   Yes, dominant strategies may not always yield the highest payoffs.

Question 8

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 9

Refer to Scenario 13.1. At your negotiated price your consumer surplus is:

Accepted Answer

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

Question 10

The relationship between a pure-strategy Nash equilibrium and a dominant-strategy equilibrium is that:

Accepted Answer

A)   a dominant-strategy equilibrium is a special case of a pure-strategy Nash equilibrium.
B)   a pure-strategy Nash equilibrium is a special case of a dominant-strategy equilibrium.
C)   they are the same.
D)   there may not be a dominant-strategy equilibrium, but there always is a pure-strategy Nash equilibrium.
E)   they are mutually exclusive and exhaustive, in that a dominant-strategy equilibrium is the same thing as a mixed-strategy Nash equilibrium.

Question 11

Relative to a simultaneous-move situation, the loss to firm C from having to move second in the game in Scenario 13.14, would be:

Accepted Answer

A)   37.
B)   20.
C)   12.
D)   8.
E)   5.

Question 12

Your economics professor has decided that your class will not be graded on a curve but on an absolute scale. Therefore, it is possible for every student in the class to get an "A." Your grade will not depend in any way on your classmates' performance. Based on this information, you decide that you should study economics three hours each day, regardless of what your classmates do. In the language of game theory, your decision to study three hours each day is:

Accepted Answer

A)   a dominant strategy.
B)   a minimax strategy.
C)   a maximin strategy.
D)   a Prisoners' Dilemma.

Question 13

A maximin strategy:

Accepted Answer

A)   maximizes the minimum gain that can be earned.
B)   maximizes the gain of one player, but minimizes the gain of the opponent.
C)   minimizes the maximum gain that can be earned.
D)   involves a random choice between two strategies, one which maximizes potential gain and one which minimizes potential loss.

Question 14

Scenario 13.8
Consider the following game: 
-The game in Scenario 13.8 is

Accepted Answer

A)   variable-sum.
B)   constant-sum.
C)   cooperative.
D)   a Prisoners' Dilemma.
E)   a Conjoint Crux.

Question 15

Nash equilibria are stable because:

Accepted Answer

A)   they involve dominant strategies.
B)   they involve constant-sum games.
C)   they occur in noncooperative games.
D)   once the strategies are chosen, no players have an incentive to negotiate jointly to change them.
E)   once the strategies are chosen, no player has an incentive to deviate unilaterally from them.

Question 16

Dale and Terry are racing automobiles around a track. Currently, Terry is in the lead. However, Dale has a faster car and is just behind Terry. The racers' strategies and payoffs are presented in the table below.  Does either player have a dominant strategy? Does the game have a Nash equilibrium? What is the maximin strategy of each player in the game?

Accepted Answer

Neither player has a dominant ...

Question 17

Which of the following conditions, if present, is sufficient to make a game cooperative?

Accepted Answer

A)   Individual payoffs are greater if all players choose the same strategy.
B)   Players can communicate with each other.
C)   Players can negotiate binding contracts committing them to particular strategies.
D)   Players must agree unanimously on any set of strategies.
E)   The payoff that is highest for all individuals together is also highest for each individual player.

Question 18

A situation in which a bidder over-values an auction item and is worse off because their bid is too high is known as the:

Accepted Answer

A)   Ellsberg Paradox.
B)   winner's curse.
C)   Arrow Impossibility Theorem.
D)   curse of the commons.

Question 19

Scenario 13.15
Consider the pricing game below: 
-Which is true about dominant strategies in the game in Scenario 13.15?

Accepted Answer

A)   $80 is dominant for Simple; $70 is dominant for Boring.
B)   $80 is dominant for Simple; $25 is dominant for Boring.
C)   $35 is dominant for Simple; $70 is dominant for Boring.
D)   $35 is dominant for Simple; $25 is dominant for Boring.
E)   There are no dominant strategies in the above game.

Question 20

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 responded 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.

Exam 13: Game Theory and Competitive Strategy

A maximin strategy:

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Which of the following conditions, if present, is sufficient to make a game cooperative?

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The relationship between a pure-strategy Nash equilibrium and a dominant-strategy equilibrium is that:

Correct Answer
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A situation in which a bidder over-values an auction item and is worse off because their bid is too high is known as the:

Correct Answer
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Scenario 13.15 Consider the pricing game below: -Which is true about dominant strategies in the game in Scenario 13.15?

Correct Answer
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Scenario 13.5 Consider the following game: -In the game in Scenario 13.5,

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In a two-person bargaining situation it is:

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Repetition of a game:

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Nash equilibria are stable because:

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Scenario 13.8 Consider the following game: -The game in Scenario 13.8 is

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Refer to Scenario 13.1. At your negotiated price your consumer surplus is:

Correct Answer
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Relative to a simultaneous-move situation, the loss to firm C from having to move second in the game in Scenario 13.14, would be:

Correct Answer
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Correct Answer
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Neither player has a dominant strategy i...
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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?

Correct Answer
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Correct Answer
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Neither player has a dominant ...
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Suppose a player in a game has a dominant strategy, but they threaten to take another action. Can this threat be credible?

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Scenario 13.6 Consider the following game. Payoffs are in millions of dollars. -Refer to the game in Scenario 13.6. What will occur if ERS Co. plays a maximin strategy?

Correct Answer
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Exam 13: Game Theory and Competitive Strategy

A maximin strategy:

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Which of the following conditions, if present, is sufficient to make a game cooperative?

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The relationship between a pure-strategy Nash equilibrium and a dominant-strategy equilibrium is that:

Correct AnswerverifiedShow Answer

A situation in which a bidder over-values an auction item and is worse off because their bid is too high is known as the:

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Scenario 13.15 Consider the pricing game below: -Which is true about dominant strategies in the game in Scenario 13.15?

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Scenario 13.5 Consider the following game: -In the game in Scenario 13.5,

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In a two-person bargaining situation it is:

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Repetition of a game:

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Nash equilibria are stable because:

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Scenario 13.8 Consider the following game: -The game in Scenario 13.8 is

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Refer to Scenario 13.1. At your negotiated price your consumer surplus is:

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Relative to a simultaneous-move situation, the loss to firm C from having to move second in the game in Scenario 13.14, would be:

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Correct AnswerverifiedNeither player has a dominant strategy i...View AnswerShow Answer

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?

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Correct AnswerverifiedNeither player has a dominant ...View AnswerShow Answer

Suppose a player in a game has a dominant strategy, but they threaten to take another action. Can this threat be credible?

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Scenario 13.6 Consider the following game. Payoffs are in millions of dollars. -Refer to the game in Scenario 13.6. What will occur if ERS Co. plays a maximin strategy?

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Neither player has a dominant strategy i...
View Answer

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Neither player has a dominant ...
View Answer

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