ch10 - File: Ch08; CHAPTER 10: Game Theory and Competitive...

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Unformatted text preview: File: Ch08; CHAPTER 10: Game Theory and Competitive Strategy Each question contains a code showing the section of the chapter text from which it was taken. The codes for this chapter are: Code Section 1. Sizing Up Competitive Situations 2. Analyzing Payoff Tables 3. Competitive Strategy 4. Appendix: Mixed Strategies MULTIPLE CHOICE 1. Game theory offers insight into a) Pricing behavior in perfectly competitive markets. b) The optimal strategy of a monopolist. c) Making decisions within firms using optimal information. d) Strategic behavior of oligopolists. e) All of the answers above are correct. ANSWER: d SECTION: 1 2. The key assumption used in game theory is that each player a) Pursues its self-interest (maximizes its payoff). b) Seeks to win at the rivals expense. c) Makes probabilistic predictions about competitor behavior. d) Seeks to maximize the players collective profits. e) Acts in a predictable manner. ANSWER: a SECTION: 1 3. In a zero-sum game, a) The equilibrium payoff is zero. b) Each player always has a dominant strategy. c) The players payoffs are in complete conflict; when one gains the other loses. d) The players may suffer the prisoners dilemma. e) Answers a and b are both correct. ANSWER: c SECTION: 2 4. In a zero-sum game, a) The players payoffs are in complete conflict; when one gains the other loses. b) There is never an advantage from communication or cooperation. 10-1 Game Theory and Competitive Strategy c) Some outcomes may be mutually preferred to other outcomes. d) It is always an advantage to move first. e) Answers a and b are both correct. ANSWER: e SECTION: 2 5. A dominant strategy a) Guarantees a player a higher payoff than its competitor. b) Calls for a contingent course of action. c) Is the best response to any strategy that the other player might select. d) Minimizes the other players payoff. e) Achieves the players greatest entry in the payoff table. ANSWER: c SECTION: 2 6. The equilibrium of the following zero-sum game is: Firm 2 Firm 1 C1 C2 C3 R1 6-6-4 R2-1 3 R3 3 2 1 a) R1 versus C1. b) R1 versus C2. c) R2 versus C2. d) R3 versus C3. e) R2 versus C3. ANSWER: d SECTION: 2 7. An equilibrium strategy can be defined as one that a) The players would reach if they were allowed to communicate. b) Is unique and invariant to the strategy chosen by the other. c) Maximizes the sum of the players payoffs. d) Is a dominant strategy. e) Maximizes each players payoff against the strategy chosen by the other. ANSWER: e SECTION: 2 8. In the following non-zero-sum game, Firm 2 10- 2 Chapter 10 Firm 1 C1 C2 R1 4, 5 10, 4 R2 2, 8 8, 7 a) Firm 1s dominant strategy is R1. b) Firm 2s dominant strategy is C2....
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ch10 - File: Ch08; CHAPTER 10: Game Theory and Competitive...

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