Question 1

In Nash equilibrium,

Accepted Answer

In a Nash equilibrium, each firm is maximizing its own profit given the actions of the other firm, meaning they have no incentive to unilaterally change their strategy because it is the best response to the strategy of the other. Choices B and C suggest a firm can increase its profit by changing its strategy unilaterally, which contradicts the definition of Nash equilibrium.

Question 2

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.
‪ 
-Following the procedure of successive elimination of dominated strategies, the manager of Hardaway Corporation will eliminate in the first round the strategy of setting

Accepted Answer

B

Question 3

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.
‪ 
-Following the procedure of successive elimination of dominated strategies, the manager of Paxton Industries will eliminate in the first round the strategy of setting

Accepted Answer

C

Question 4

If incumbent firm Dell threatens potential new entrant Rising Star with the threat, "If you enter this market, we will lower our price and keep it low until you are

Accepted Answer

B) Rising Star's decision to enter will be unaffected if they believe Dell's threat is not credible, meaning they doubt Dell will follow through or sustain the low prices. C) Dell's threat is a strategic move aimed at deterring Rising Star from entering the market, thereby protecting its market share and potentially its profits.

Question 5

In every prisoners' dilemma situation, cooperation

Accepted Answer

In a prisoners' dilemma situation, cooperation is indeed possible, although not always the outcome that rational, self-interested players choose due to the structure of the game which often rewards defection more than cooperation.

Question 6

Price matching

Accepted Answer

Price matching is indeed a strategic commitment and must be irreversible to effectively deter competitors from lowering their prices, as making it reversible would not provide a credible deterrent.

Question 7

The managers of Alpha and Beta must make repeated advertising decisions simultaneously at the beginning of every month.  They choose either low or high levels of advertising expenditure.  They both employ a discount rate of 2.5 percent per month.  Use the payoff table shown below to answer the next five questions.
-If Beta decides not to cooperate, its undiscounted benefit from cheating for one month is

Accepted Answer

Given the information, the correct answer is C) $3,000. This is determined by the context of the question, which implies a specific value associated with Beta's benefit from not cooperating for one month. Without additional context or calculations provided in the question, the selection is based on the assumption that this information is derived from a specific scenario or calculation not fully detailed here.

Question 8

The managers of Alpha and Beta must make repeated advertising decisions simultaneously at the beginning of every month.  They choose either low or high levels of advertising expenditure.  They both employ a discount rate of 2.5 percent per month.  Use the payoff table shown below to answer the next five questions.
-Beta expects punishment to last for two months after being caught (i.e., to be penalized in months 2 and 3). What would be the value-maximizing decision for Beta?

Accepted Answer

The answer of The managers of Alpha and Beta must...

Question 9

Fill in the blanks below:
-_______________ decisions occur when managers must make their decisions without knowing the decisions made by their rivals.

Accepted Answer

The answer of Fill in the blanks below:
-_______________ decisions occur...

Question 10

Fill in the blanks below:
-In a _______________ _______________ equilibrium, each and every rival has a single decision choice that is its best decision to make for whatever decision its rivals might make. This situation is also a _______________ equilibrium.

Accepted Answer

The answer of Fill in the blanks below:
-In a _______________...

Question 11

Fill in the blanks below:
-A _______________ _______________ is a simultaneous decision situation in which all rivals possess dominant strategies, but they are all worse off when they choose their dominant strategies than if they had cooperated to make some other decisions.

Accepted Answer

The answer of Fill in the blanks below:
-A _______________ _______________...

Question 12

Fill in the blanks below:
-Strategically astute managers will search first for _______________ strategies, and if none of these can be discovered, they next look for _______________ strategies.

Accepted Answer

The answer of Fill in the blanks below:
-Strategically astute managers...

Question 13

Fill in the blanks below:
-A Nash equilibrium is a set of decisions in which all firms are choosing their _______________ actions given the decisions they _______________ their rivals will make.

Accepted Answer

The answer of Fill in the blanks below:
-A Nash equilibrium...

Question 14

Fill in the blanks below:
-When a set of decisions is such that no single firm can _______________ make a different decision and increase its own payoff, the set of decisions are strategically stable.

Accepted Answer

The answer of Fill in the blanks below:
-When a set...

Question 15

Fill in the blanks below:
-Rivals ignore any strategic moves that are not _______________.

Accepted Answer

The answer of Fill in the blanks below:
-Rivals ignore any...

Question 16

Two firms, Allied Corporation and Union, Inc., compete primarily by price. Each firm must choose either a high price or a low price simultaneously. The following payoff table shows the profit each firm would earn in each of the four possible decision combinations:
‪ 
-Allied's dominant strategy is ____________ (low price, high price, it has no dominant strategy).

Accepted Answer