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1. In a repeated prisoners' dilemma decision, both managers can make credible threats to punish cheating because If either manager cheats, the other

1. In a repeated prisoners' dilemma decision, both managers can make credible threats to punish cheating because

If either manager cheats, the other manager can increase its profit by also cheating.

Both of the cheating cells in the payoff table are strategically stable cells.

When both firms cheat, they both avoid the Nash equilibrium cell.

Both a and c.

QUESTION 2

In an oligopoly market,

A firm must lower price in order to sell more output.

Each firm faces a demand curve that depends on how the firm's rivals behave.

A few firms account for a large portion of industry sales.

Both a and b.

All of the above.

QUESTION 3

If the condition in the question above is NOT met, Burger Doodle will set price equal to $________ at decision node 1 and the outcome _____________ (is, is not) a Nash equilibrium.

8; is.

8; is not.

12; is.

12; is not.

QUESTION 4

When Arbuckle and Son makes its advertising decision first,

it need not consider what Mr. B's advertising decision will be since Arbuckle and Son cannot know what decision Mr. B will make.

the common knowledge that both managers have about the payoff table insures that Arbuckle will earn $5,000 of weekly profit.

it should use the roll-back method to insure that it will earn $5,000 of weekly profit.

all of the above.

none of the above.

QUESTION 5

Mr. B's

Has a dominant strategy: choose a high level of advertising.

Has a dominant strategy: choose a low level of advertising.

Has a dominated strategy: choose a low level of advertising.

Has no dominated strategy.

Both a and c.

QUESTION 6

Which of the following are trigger strategies?

Eye-for-an-eye.

Tit-for-tat.

Grim.

Both b and c.

All of the above.

QUESTION 7

Oligopolists face interdependent profits because

There are few firms in the market.

The product is differentiated.

Industry sales are large.

All of the above.

QUESTION 8

In sequential decision making situations, using the roll-back method

Results in a Nash equilibrium.

Allows the decision maker going second to predict what the decision maker going first will do.

Allows predictions about what the decision maker going second will do to be used by the decision maker going first.

Both a and b.

Both a and c.

QUESTION 9

The next 4 questions refer to the following figure:
Picture
Two firms, A and B, produce similar, but not identical, products. BRA and BRB are, respectively, the reaction functions for firms A and B, which compete primarily by price.

If firm A predicts B will set a price of $12, then firm A should charge a price of ______ to maximize A's profit.

$6.

$8.

$10.

$12.

QUESTION 10

Which of the following is not an implication of oligopoly interdependence:

Strategic behavior.

The need to get into the heads of rival managers.

Making decisions that result in the equating of marginal revenue and marginal cost.

Thinking ahead in sequential decisions to anticipate rivals' future actions.

QUESTION 11

Answer questions 24 through 28 using the following payoff table for Hardaway Corporation and Paxton Industries. These two firms must make simultaneous pricing decisions. They can choose low, medium, or high prices. The payoffs given are in thousands of dollars of profit per month.
Picture

For the simultaneous pricing decision facing Hardaway Corporation and Paxton Industries,

Cell I is a strategically stable pricing outcome.

Cell A is the likely outcome of the pricing decision.

Cell E is the equilibrium pricing decision.

Both firms pricing low is a Nash equilibrium.

Both b and d.

QUESTION 12

The next 3 questions refer to the following figure showing the reaction functions of oligopoly firms A and B.
Picture

In Nash equilibrium,

Firm A runs 4 ads and firm B runs 7 ads.

Firm A runs 7 ads and firm B runs 4 ads.

Firm A runs 2 ads and firm B runs 2 ads.

Firm A runs 3 ads and firm B runs 5 ads.

None of the above.

QUESTION 13

Burger Doodle, the incumbent firm, wishes to set a limit price of $8 (rather than the profit-maximizing price of $12) to prevent Designer Burger from entering its profitable market. The game tree above shows the payoffs for various decisions. Burger Doodle makes its pricing decision, then Designer Burger decides whether to enter or stay out of the market. If Designer Burger chooses to enter the market, then Burger Doodle may or may not decide to accommodate Designer's entry by changing its initial price to the Nash equilibrium price of $10. Use the following game tree to answer the next 3 questions:
Picture

If the condition in the question above is met, Burger Doodle will set price equal to $________ and it will earn $__________ of profit while Designer Burger will earn $__________ of profit.

8; 125,000; 0.

8; 75,000; -40,000.

10; 101,000; 25,000.

10: 96,000; 25,000.

12; 165,000; 0.

QUESTION 14

Price matching is a strategic move that

Seeks to make cheating unprofitable.

Must generally be announced publicly in order to have the desired effect.

Has no usefulness to managers if a simultaneous pricing decision is going to be made only one time.

Both a and b.

All of the above.

QUESTION 15

Cooperation is achieved in an oligopoly market when

Most of the firms in the market decide not to cheat.

Some of the firms in the market decide not to cheat.

At least one of the firms in the market decide not to cheat.

All of the firms in the market decide not to cheat.

QUESTION 16

In a repeated decision for which the present value of the benefits of cheating is greater than the present value of the costs of cheating,

Deciding not to cheat is a value-maximizing decision.

Deciding to cooperate is a value-maximizing decision.

Deciding to cheat is a value-maximizing decision.

Both a and b.


QUESTION 17

In a one-time prisoners' dilemma decision,

All firms expect the other firms to cheat.

Cheating is usually not a value-maximizing decision.

Cheating is less likely when the discount rate is low.

Cheating is less likely when the discount rate is high.

QUESTION 18

By making its advertising decision after Arbuckle and Son, Mr. B's

Enjoys a first-mover advantage.

Enjoys a second-mover advantage.

Does not end up any better off than if it made its advertising decision first.

Can secure a $5,000 profit payoff for itself.

Both b and d.

QUESTION 19

In game theory, what is a dominant strategy?

A strategy that leads to the best possible outcome for both firms.

Any strategy that leads to a Nash equilibrium.

A strategy that yields a minimax outcome.

A strategy that leads to the best outcome for a firm no matter what strategy the other chooses.

None of the above.

QUESTION 20

In game theory, what is a dominant strategy?

A strategy that leads to the best possible outcome for both firms.

Any strategy that leads to a Nash equilibrium.

A strategy that yields a minimax outcome.

A strategy that leads to the best outcome for a firm no matter what strategy the other chooses.

None of the above.


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game theory assignment.docx

1. In a repeated prisoners' dilemma decision, both managers can make credible threats to
punish cheating because
Both a and c. QUESTION 2
In an oligopoly market,
All of the above. QUESTION 3
If the...

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