Question 1

Suppose that Ben and Tim are playing a finitely repeated flag game. The game starts with 7 flags in the ground, and the players take turns removing the flags. A player must remove either 1, 2, or 3 flags per turn. The player who takes the last flag out of the ground, whether it is by itself or in a group, wins the game. Assume that Ben decides first on how many flags to remove. How many flags should Ben remove on his first turn to guarantee that he will win the game? Use backward induction.

Accepted Answer

A)   1
B)   2
C)   3
D)   either 1 or 2E) B) and C)
F) None of the above

Question 2

Use the following to answer question:
Table 12.30 
-(Table 12.30)

Accepted Answer

a. Each player's dominant strategy is to...

Question 3

The following game:

Accepted Answer

A)   has no mixed-strategy equilibria.
B)   has a mixed-strategy equilibrium in which Row plays Up with 0.5 probability and Down with 0.5 probability.
C)   has a mixed-strategy equilibrium in which Column plays Left with 0.5 probability and Right with 0.5 probability.
D)   has a mixed-strategy equilibrium in which answers B and C both hold.E) A) and B)
F) All of the above

Question 4

Use the following to answer question:
Table 12.32 
-(Table 12.32) Two firms have formed an agreement to restrict output. They are playing an infinitely repeated game in which output decisions must be made every period. Both firms are using a grim trigger strategy. At what value of d (discount rate) would Firm A be indifferent about keeping the agreement or cheating on the agreement?

Accepted Answer

The expected payoff ...

Question 5

Big Earth and District 13 are two producers of neodymium, a rare earth. If they agree to restrict output, each firm earns $100 million per year. If both firms expand output, each firm earns $50 million per year. If one firm restricts output and the other firm expands output, the firm that expands output earns $150 million per year and the other firm earns only $30 million per year. Assume that Big Earth and District 13 will compete infinitely, with each firm following a grim trigger strategy. Which of the following statements is TRUE?

Accepted Answer

A)   If d = 0.50, Big Earth is indifferent between agreeing to restrict output and expanding output.
B)   If d = 0.40, Big Earth would be better off restricting output.
C)   If d = 0.90, Big Earth is indifferent between agreeing to restrict output and expanding output.
D)   If d = 0.75, Big Earth would be better off by expanding output.E) All of the above
F) B) and C)

Question 6

Consider two players in the following game.  For what values of the discount rate would a grim trigger strategy ensure cooperation between the two players if they play forever?

Accepted Answer

Both players are better off if they can ...

Question 7

Which of the following statements is FALSE?

Accepted Answer

A)   It is possible for one player to play a mixed strategy while another plays a pure strategy.
B)   Some games have an infinite number of mixed-strategy equilibria.
C)   In games with both pure and mixed Nash equilibria, it is best for players to play the pure strategies, not the mixed ones.
D)   Mixed strategies entail assigning probabilities to the pure strategies available to a player.E) B) and D)
F) B) and C)

Question 8

Use the following to answer questions 19-20:
Table 12.12 
-(Table 12.12)  The payoffs are profits in millions of dollars. If Firm 1 follows a maximin strategy, the outcome of this game is:

Accepted Answer

A)   (20 , 20) .
B)   (8 , 8) .
C)   (-20 , 15) .
D)   (-1 , 10) .E) All of the above
F) None of the above

Question 9

Use the following to answer question:
Figure 12.1 
-(Figure 12.1)  The Nash equilibrium of this game is:

Accepted Answer

A)   Low , Up.
B)   Low , Down.
C)   High , Up.
D)   High , Down.E) A) and C)
F) All of the above

Question 10

Use the following to answer question:
Table 12.4 
-(Table 12.4)  Payoffs are profits in thousands of dollars. Which of the following statements is TRUE?

Accepted Answer

A)   This game has no Nash equilibrium.
B)   Horizon's dominant strategy is high price.
C)   The Nash equilibrium occurs when both companies choose the low-price strategy.
D)   There are two Nash equilibria, (80 , 80)  and (65 , 65) .E) A) and D)
F) A) and C)

Question 11

The lesson from Dr. Strangelove is that:

Accepted Answer

A)   your enemies must know about your doomsday machine if it is to serve as a credible deterrent to attack.
B)   to win at love you must sometimes make implausible promises to your lover.
C)   prisoner's dilemma can be avoided by making side payments to your opponent.
D)   forward induction is never superior to backward induction.E) None of the above
F) A) and B)

Question 12

Use the following to answer question:
Table 12.10 
-(Table 12.10)  The table shows the payoffs from the game rock-paper-scissors. Which of the following statements is (are)  TRUE?

Accepted Answer

A)   II and III
B)   I and III
C)   III
D)   I and IIE) B) and C)
F) A) and C)

Question 13

Use the following to answer question:
Table 12.3 
-(Table 12.3)  The payoffs represent profits. If Cape North and Imperial both choose their dominated strategy, Cape North will earn a profit of _____ and Imperial will earn a profit of _____.

Accepted Answer

A)   $154; $154
B)   $120; $120
C)   $75; $180
D)   $75; $75E) B) and C)
F) A) and D)

Question 14

Consider two players with the following decision tree:  What is the Nash equilibrium?

Accepted Answer

The game can be solved using backward in...

Question 15

At one time, tobacco companies vigorously fought lawsuits by their current and former customers, even though the cost of defending the lawsuits exceeded the amount of money demanded by the smokers. What type of strategic behavior were tobacco companies using?

Accepted Answer

A)   excess capacity
B)   reputation
C)   grim reaper
D)   MADE) C) and D)
F) A) and D)

Question 16

Use the following to answer question:
Table 12.8 
-(Table 12.8)  Payoffs represent profits measured in thousands of dollars. Which of the following outcomes represent(s)  a Nash equilibrium?

Accepted Answer

A)   II and I
B)   II
C)   II and III
D)   III and IVE) A) and D)
F) C) and D)

Question 17

Use the following to answer question:
Table 12.6 
-(Table 12.6)  Payoffs represent profits in thousands. What is the Nash equilibrium?

Accepted Answer

A)   (20 , 20) 
B)   (17 , 17) 
C)   (14 , 14) 
D)   (19 , 10)  or (10 , 19) E) B) and D)
F) B) and C)

Question 18

Use the following to answer questions 26-28:
Table 12.16 
-(Table 12.16)  The payoffs represent profits measured in thousands of dollars. In this infinitely repeated game, Firm A and Firm B are both using grim trigger strategies; they agree to charge a high price in period 1. If Firm A charges a high price for all periods, what is its expected payoff? Assume that d = 0.9.

Accepted Answer

A)   $720,000
B)   $3 million
C)   $364,000
D)   $200,000E) All of the above
F) C) and D)

Question 19

Use the following to answer question:
Table 12.26 
-(Table 12.26) payoffs are in thousands of dollars.

Accepted Answer

a. Fresh Fruit Market's dominant strateg...

Question 20

Use the following to answer question:
Figure 12.3    
-(Figure 12.3)  Which figure corresponds to the following normal-form game?

Accepted Answer

A)   panel a
B)   panel b
C)   panel c
D)   panel dE) C) and D)
F) None of the above

Exam 12: Game Theory

Use the following to answer question: Figure 12.3 -(Figure 12.3) Which figure corresponds to the following normal-form game?

Correct Answer
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Correct Answer
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Consider two players in the following game. For what values of the discount rate would a grim trigger strategy ensure cooperation between the two players if they play forever?

Correct Answer
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Both players are better off if they can ...
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Use the following to answer question: Table 12.4 -(Table 12.4) Payoffs are profits in thousands of dollars. Which of the following statements is TRUE?

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Correct Answer
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Which of the following statements is FALSE?

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Use the following to answer question: Table 12.6 -(Table 12.6) Payoffs represent profits in thousands. What is the Nash equilibrium?

Correct Answer
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At one time, tobacco companies vigorously fought lawsuits by their current and former customers, even though the cost of defending the lawsuits exceeded the amount of money demanded by the smokers. What type of strategic behavior were tobacco companies using?

Correct Answer
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Use the following to answer questions 19-20: Table 12.12 -(Table 12.12) The payoffs are profits in millions of dollars. If Firm 1 follows a maximin strategy, the outcome of this game is:

Correct Answer
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The lesson from Dr. Strangelove is that:

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The expected payoff ...
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Use the following to answer question: Table 12.8 -(Table 12.8) Payoffs represent profits measured in thousands of dollars. Which of the following outcomes represent(s) a Nash equilibrium?

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Use the following to answer question: Figure 12.1 -(Figure 12.1) The Nash equilibrium of this game is:

Correct Answer
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Correct Answer
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Use the following to answer question: Table 12.26 -(Table 12.26) payoffs are in thousands of dollars.

Correct Answer
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a. Fresh Fruit Market's dominant strateg...
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The following game:

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Use the following to answer question: Table 12.10 -(Table 12.10) The table shows the payoffs from the game rock-paper-scissors. Which of the following statements is (are) TRUE?

Correct Answer
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Use the following to answer question: Table 12.3 -(Table 12.3) The payoffs represent profits. If Cape North and Imperial both choose their dominated strategy, Cape North will earn a profit of _ and Imperial will earn a profit of _.

Correct Answer
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Use the following to answer question: Table 12.30 -(Table 12.30)

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a. Each player's dominant strategy is to...
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Consider two players with the following decision tree: What is the Nash equilibrium?

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The game can be solved using backward in...
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Exam 12: Game Theory

Use the following to answer question: Figure 12.3 -(Figure 12.3) Which figure corresponds to the following normal-form game?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Consider two players in the following game. For what values of the discount rate would a grim trigger strategy ensure cooperation between the two players if they play forever?

Correct AnswerverifiedBoth players are better off if they can ...View AnswerShow Answer

Use the following to answer question: Table 12.4 -(Table 12.4) Payoffs are profits in thousands of dollars. Which of the following statements is TRUE?

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Correct AnswerverifiedShow Answer

Which of the following statements is FALSE?

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Use the following to answer question: Table 12.6 -(Table 12.6) Payoffs represent profits in thousands. What is the Nash equilibrium?

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At one time, tobacco companies vigorously fought lawsuits by their current and former customers, even though the cost of defending the lawsuits exceeded the amount of money demanded by the smokers. What type of strategic behavior were tobacco companies using?

Correct AnswerverifiedShow Answer

Use the following to answer questions 19-20: Table 12.12 -(Table 12.12) The payoffs are profits in millions of dollars. If Firm 1 follows a maximin strategy, the outcome of this game is:

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The lesson from Dr. Strangelove is that:

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Correct AnswerverifiedThe expected payoff ...View AnswerShow Answer

Use the following to answer question: Table 12.8 -(Table 12.8) Payoffs represent profits measured in thousands of dollars. Which of the following outcomes represent(s) a Nash equilibrium?

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Use the following to answer question: Figure 12.1 -(Figure 12.1) The Nash equilibrium of this game is:

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Use the following to answer question: Table 12.26 -(Table 12.26) payoffs are in thousands of dollars.

Correct Answerverifieda. Fresh Fruit Market's dominant strateg...View AnswerShow Answer

The following game:

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Use the following to answer question: Table 12.10 -(Table 12.10) The table shows the payoffs from the game rock-paper-scissors. Which of the following statements is (are) TRUE?

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Use the following to answer question: Table 12.3 -(Table 12.3) The payoffs represent profits. If Cape North and Imperial both choose their dominated strategy, Cape North will earn a profit of _____ and Imperial will earn a profit of _____.

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Use the following to answer question: Table 12.30 -(Table 12.30)

Correct Answerverifieda. Each player's dominant strategy is to...View AnswerShow Answer

Consider two players with the following decision tree: What is the Nash equilibrium?

Correct AnswerverifiedThe game can be solved using backward in...View AnswerShow Answer

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Correct Answer
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Correct Answer
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Both players are better off if they can ...
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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The expected payoff ...
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Correct Answer
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Correct Answer
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Correct Answer
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a. Fresh Fruit Market's dominant strateg...
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Correct Answer
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Correct Answer
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Use the following to answer question: Table 12.3 -(Table 12.3) The payoffs represent profits. If Cape North and Imperial both choose their dominated strategy, Cape North will earn a profit of _ and Imperial will earn a profit of _.

Correct Answer
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Correct Answer
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a. Each player's dominant strategy is to...
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The game can be solved using backward in...
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