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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 selfinterest (maximizes its payoff). b) Seeks to win at the rival’s 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 zerosum 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 prisoner’s dilemma. e) Answers a and b are both correct. ANSWER: c SECTION: 2 4. In a zerosum 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. 101 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 player’s payoff. e) Achieves the player’s greatest entry in the payoff table. ANSWER: c SECTION: 2 6. The equilibrium of the following zerosum game is: Firm 2 Firm 1 C1 C2 C3 R1 664 R21 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 player’s payoff against the strategy chosen by the other. ANSWER: e SECTION: 2 8. In the following nonzerosum game, Firm 2 10 2 Chapter 10 Firm 1 C1 C2 R1 4, 5 10, 4 R2 2, 8 8, 7 a) Firm 1’s dominant strategy is R1. b) Firm 2’s dominant strategy is C2....
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This note was uploaded on 03/11/2012 for the course ECON 333 taught by Professor Barkley during the Fall '08 term at CSU Fullerton.
 Fall '08
 BARKLEY
 Game Theory

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