Question 1

In a Nash equilibrium,

Accepted Answer

A)   each player has a dominant strategy.
B)   no players have a dominant strategy.
C)   at least one player has a dominant strategy.
D)   players may or may not have dominant strategies.
E)   the player with the dominant strategy will win.

Question 2

Consider the Matching Pennies game:

Suppose Player A always uses a pure strategy that selects heads. What is Player B's optimal response to this pure strategy?

Accepted Answer

A)   Always select heads.
B)   Always select tails.
C)   Mixed strategy with probability 1/2 on heads and 1/2 on tails
D)   There is no optimal pure or mixed strategy for this situation.

Question 3

Scenario 13.2:
Consider the following game: 
-Which of the following is true about the game in Scenario 13.2?

Accepted Answer

A)   ABC's dominant strategy is to offer a rebate.
B)   ABC's dominant strategy is not offer a rebate.
C)   XYZ's dominant strategy is to offer a rebate.
D)   XYZ's dominant strategy is not offer a rebate.
E)   Both ABC and XYZ offer a rebate as a dominant strategy.

Question 4

Scenario 13.8
Consider the following game: 
-In game in Scenario 13.8, what is the Nash equilibrium?

Accepted Answer

A)   The strategy pair associated with $1, $10.
B)   The strategy pair associated with $2, $0.
C)   The strategy pair associated with $1, -$5000.
D)   The strategy pair associated with $2, $2.
E)   There is no Nash equilibrium in pure strategies.

Question 5

To deter a potential entrant, an existing firm in a market may threaten to sharply increase production so that the entrant will be left with a small share of the market. This may be a credible threat if:

Accepted Answer

A)   production exhibits economies of scale.
B)   production exhibits diseconomies of scale.
C)   production costs may fall due to learning-by-doing.
D)   A and C are correct.
E)   B and C are correct.

Question 6

What is the dominant strategy for bidders in an English oral auction?

Accepted Answer

A)   Keep bidding until all other bidders quit, regardless of your reservation price.
B)   Bid until the previous bid price equals the reservation price of the last bidder.
C)   Bid until the first-price and second-price bids are equal.
D)   Stop bidding once the price exceeds your reservation price.

Question 7

Scenario 13.9
Consider the following game:
Two firms are situated next to a lake, and it costs each firm $1,500 per period to use filters that avoid polluting the lake. However, each firm must use the lake's water in production, so it is also costly to have a polluted lake. The cost to each firm of dealing with water from a polluted lake is $1,000 times the number of polluting firms. 
-Refer to Scenario 13.9. If this game is repeated over an infinite or uncertain horizon, the most likely observed behavior will be that

Accepted Answer

A)   both firms pollute.
B)   only Lago pollutes.
C)   only Nessie pollutes.
D)   neither firm pollutes.
E)   the firms alternate polluting in different periods.

Question 8

Scenario 13.17
Consider the entry-deterrence game below. The potential entrant would have to spend some amount in sunk costs to enter the market. 
-In the game in Scenario 13.17, who moves first?

Accepted Answer

A)   Potential Entrant
B)   Incumbent Monopoly
C)   It's a sequential game; firms alternate moving first.
D)   Both players move simultaneously.
E)   Who moves first is decided by the equilibrium.

Question 9

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 pay-offs are presented in the table below. The goal of the drivers is to do as well as possible in the race. There are a total of 43 cars on the track.  
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 strategy, ...

Question 10

Wal-Mart was one of the most successful firms of the 1970s and 1980s. Much of Wal-Mart's success can be credited to its expansion strategy: they rushed to open the first discount store in small towns that could only support one discount store. In the language of game theory:

Accepted Answer

A)   Wal-Mart was a dominant firm.
B)   Wal-Mart made empty threats.
C)   Wal-Mart employed a maximin strategy.
D)   Wal-Mart employed a preemptive strategy. D

Question 11

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 12

Consider the following output-choice game for two firms:

What is the outcome of the game if both firms use maximin strategies?

Accepted Answer

A)   Both firms choose low output levels.
B)   Both firms choose medium output levels.
C)   There is no clear outcome under a maximin strategy for both firms.
D)   There are two possible maximin outcomes --- Firm 1 chooses medium and Firm 2 chooses low, or Firm 1 chooses low and Firm 2 chooses medium.

Question 13

What kind of game is shown in Scenario 13.13?

Accepted Answer

A)   Battle of the Sexes.
B)   Matching Pennies.
C)   Prisoners' Dilemma.
D)   The Product Choice game.
E)   It is not possible to tell what kind of game it is because the strategies have not been identified.

Question 14

Scenario 13.9
Consider the following game:
Two firms are situated next to a lake, and it costs each firm $1,500 per period to use filters that avoid polluting the lake. However, each firm must use the lake's water in production, so it is also costly to have a polluted lake. The cost to each firm of dealing with water from a polluted lake is $1,000 times the number of polluting firms. 
-A "mixed strategy" equilibrium means that

Accepted Answer

A)   the strategies chosen by the players represent different behaviors.
B)   one player has a dominant strategy, and one does not.
C)   one player has a pure strategy, and one does not.
D)   the equilibrium strategy is an assignment of probabilities to pure strategies.
E)   the equilibrium strategy involves alternating between a dominant strategy and a Nash strategy.

Question 15

Two firms in a local market compete in the manufacture of cyberwidgets. Each firm must decide if it will offer a warranty or not. The pay-offs of each firm's strategy is a function of their competitor as well. The pay-off matrix is presented below.  
If firm #1 announces they will offer a warranty regardless of what firm #2 does, is this a credible threat? Why or why not?

Accepted Answer

Both firms offering a warranty and both ...

Question 16

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 17

As defined by Thomas Schelling, a "strategic move" is

Accepted Answer

A)   any strategy choice in a game.
B)   any strategy choice consistent with Nash equilibrium.
C)   any strategy choice in a sequential game.
D)   a strategy choice that influences the subsequent strategy choice of another player.
E)   a strategy choice that restricts the set of outcomes available to another player.

Question 18

Use the following statements to answer this question:
I. If mixed strategies are allowed, every game has at least one Nash equilibrium.
II. The maximin strategy is optimal in the game of "matching pennies."

Accepted Answer

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

Question 19

Which of the following statements represents a key point about strategic decision making?

Accepted Answer

A)   Strategy is less important in nonconstant sum games than in constant sum games.
B)   The payoffs in cooperative games will always be higher than in noncooperative games.
C)   It is essential to understand your opponent's point of view and to deduce his or her likely responses to your actions.
D)   Optimal strategies in cooperative games always lead to economically efficient outcomes. C

Question 20

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 Prisoner's dilemma. A

Exam 13: Game Theory and Competitive Strategy

In a Nash equilibrium,

Correct Answer
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Consider the Matching Pennies game: Suppose Player A always uses a pure strategy that selects heads. What is Player B's optimal response to this pure strategy?

Correct Answer
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Scenario 13.2: Consider the following game: -Which of the following is true about the game in Scenario 13.2?

Correct Answer
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Scenario 13.8 Consider the following game: -In game in Scenario 13.8, what is the Nash equilibrium?

Correct Answer
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To deter a potential entrant, an existing firm in a market may threaten to sharply increase production so that the entrant will be left with a small share of the market. This may be a credible threat if:

Correct Answer
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What is the dominant strategy for bidders in an English oral auction?

Correct Answer
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Scenario 13.17 Consider the entry-deterrence game below. The potential entrant would have to spend some amount in sunk costs to enter the market. -In the game in Scenario 13.17, who moves first?

Correct Answer
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Neither player has a dominant strategy, ...
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Wal-Mart was one of the most successful firms of the 1970s and 1980s. Much of Wal-Mart's success can be credited to its expansion strategy: they rushed to open the first discount store in small towns that could only support one discount store. In the language of game theory:

Correct Answer
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D

Nash equilibria are stable because

Correct Answer
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Consider the following output-choice game for two firms: What is the outcome of the game if both firms use maximin strategies?

Correct Answer
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What kind of game is shown in Scenario 13.13?

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Both firms offering a warranty and both ...
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Which of the following conditions, if present, is sufficient to make a game cooperative?

Correct Answer
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As defined by Thomas Schelling, a "strategic move" is

Correct Answer
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Use the following statements to answer this question: I. If mixed strategies are allowed, every game has at least one Nash equilibrium. II. The maximin strategy is optimal in the game of "matching pennies."

Correct Answer
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Which of the following statements represents a key point about strategic decision making?

Correct Answer
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C

Correct Answer
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A

Exam 13: Game Theory and Competitive Strategy

In a Nash equilibrium,

Correct AnswerverifiedShow Answer

Consider the Matching Pennies game: Suppose Player A always uses a pure strategy that selects heads. What is Player B's optimal response to this pure strategy?

Correct AnswerverifiedShow Answer

Scenario 13.2: Consider the following game: -Which of the following is true about the game in Scenario 13.2?

Correct AnswerverifiedShow Answer

Scenario 13.8 Consider the following game: -In game in Scenario 13.8, what is the Nash equilibrium?

Correct AnswerverifiedShow Answer

To deter a potential entrant, an existing firm in a market may threaten to sharply increase production so that the entrant will be left with a small share of the market. This may be a credible threat if:

Correct AnswerverifiedShow Answer

What is the dominant strategy for bidders in an English oral auction?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Scenario 13.17 Consider the entry-deterrence game below. The potential entrant would have to spend some amount in sunk costs to enter the market. -In the game in Scenario 13.17, who moves first?

Correct AnswerverifiedShow Answer

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

Wal-Mart was one of the most successful firms of the 1970s and 1980s. Much of Wal-Mart's success can be credited to its expansion strategy: they rushed to open the first discount store in small towns that could only support one discount store. In the language of game theory:

Correct AnswerverifiedD

Nash equilibria are stable because

Correct AnswerverifiedShow Answer

Consider the following output-choice game for two firms: What is the outcome of the game if both firms use maximin strategies?

Correct AnswerverifiedShow Answer

What kind of game is shown in Scenario 13.13?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedBoth firms offering a warranty and both ...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

As defined by Thomas Schelling, a "strategic move" is

Correct AnswerverifiedShow Answer

Use the following statements to answer this question: I. If mixed strategies are allowed, every game has at least one Nash equilibrium. II. The maximin strategy is optimal in the game of "matching pennies."

Correct AnswerverifiedShow Answer

Which of the following statements represents a key point about strategic decision making?

Correct AnswerverifiedC

Correct AnswerverifiedA

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

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D

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Both firms offering a warranty and both ...
View Answer

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C

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A