Question 1

A game of strategy is a multiperson decision problem in which an abstract set of rules constrains the behavior of players and defines outcomes on the basis of the actions taken by the players.

Accepted Answer

A game of strategy is indeed a multiperson decision problem where players' behavior is constrained by a set of abstract rules and outcomes are determined based on their actions.

Question 2

A game in which, when any player makes a move, the player knows all the prior choices made by all the other players is called a game of

Accepted Answer

In a game of perfect information, all the players have complete knowledge of the game state including all prior moves made by any player. This means that each player can make a fully informed decision based on the information available. In games of imperfect information, the players do not have complete knowledge of the game state or the choices made by other players, which can introduce an element of uncertainty or randomness into the game. Therefore, the best choice in this case is A) perfect information.

Question 3

A trigger strategy is a type of strategy in an infinite horizon repeated game where one deviation triggers an infinite punishment; also known as a grim strategy.

Accepted Answer

A trigger strategy is indeed a type of strategy in an infinite horizon repeated game where one deviation triggers an infinite punishment, also known as a grim strategy.

Question 4

A zero-sum game is a game in which the gain of one player equals the loss of the other player.

Accepted Answer

In a zero-sum game, the total gains and losses of all players are always equal to zero. Therefore, the gain of one player must equal the loss of the other player, making it a true statement.

Question 5

A complete plan of action for the player that tells us what choice the player should make at any node of the game tree or in any situation that might arise during the play of the game is known as

Accepted Answer

A pure strategy provides a complete plan of action for the player that tells us what choice the player should make at any node of the game tree or in any situation that might arise during the play of the game. Hence, the best choice is to use a pure strategy that provides a predetermined plan for every possible situation in the game.

Question 6

A refinement concept places a set of extra constraints on a Nash equilibrium in order to select among multiple equilibria if they exist or to simply make the equilibrium more plausible.

Accepted Answer

This is a correct description of what a refinement concept does.

Question 7

The sets that indicate what a player knows when it is the player's turn to make a move in a game tree are called information sets.

Accepted Answer

This statement is true. Information sets are used in game theory to represent the knowledge that a player has at a given point in a game tree. When it is the player's turn to make a move, the information set represents all the possible choices that the player has, based on the information available to them. The information set includes all the nodes in the tree where the player has an equivalent set of possible moves, based on the information available to them.

Question 8

A dominated strategy is a strategy that is dominated by another strategy.

Accepted Answer

A dominated strategy is a strategy that is strictly worse than another strategy for all possible inputs or actions of the other players. Thus, it can be eliminated from consideration without affecting the optimal strategy for the player who has the dominated strategy.

Question 9

A visual depiction of an extensive form game that presents the rules and payoff contingencies of the game is called a game

Accepted Answer

A visual depiction of an extensive form game that presents the rules and payoff contingencies of the game is called a game tree. Therefore, the best choice is B. Choice A (game theory) is the study of decision-making under strategic situations and can be applied to both extensive and normal form games. Choice C (strategy) refers to the actions taken by players in a game to achieve their objectives and can be represented in a game tree. However, it does not encompass the entire visual depiction of the game.

Question 10

Strategy A dominates strategy B if it gives a higher payoff than B no matter what the opposing players do.

Accepted Answer

This is the definition of dominant strategy.

Question 11

Exhibit 11-1
$\begin{array} { | l | l | l | l | l |} 
\hline & & & \text { Player 2 } & \
\hline & & \text { Laft } & & \text { Right } \
\hline & \text { Tap } & + 1 , - 1 & & - 1 , + 1 \
\hline \text { Player 1 } & & & & \
\hline & \text { Battam } & - 1 , + 1 & & + 1 , - 1 \
\hline
\end{array}$
-Refer to Exhibit 11-1. This game is shown in

Accepted Answer

The game is shown in a matrix format with the payoffs for each player listed in each cell. This is characteristic of a game in normal form. 
As for the best choice, it depends on the strategy of the other player. If Player 2 chooses "Left," Player 1's best option is "Bottom." If Player 2 chooses "Right," Player 1's best option is "Top." There is no dominant strategy for either player, as the best choice depends on the other player's move.

Question 12

A state in which no player will wish to change his or her behavior given the behavior of the other players is known as equilibrium.

Accepted Answer

This is the definition of Nash equilibrium, named after John Nash, a Nobel Prize winning economist who developed the concept.

Question 13

Extensive form is a

Accepted Answer

The extensive form is a description of a game of strategy that provides a detailed description of the rules of the game. It includes a tree-like diagram that shows the sequence of play, the available actions at each decision point, and the payoffs associated with the possible outcomes. A matrix showing the players, strategies, and payoffs of a game is called a normal form game. A long game with at least ten strategies and ten players is not a specific definition and does not relate to the extensive form.

Question 14

A 2 × 2 matrix game in which each player has a dominant strategy determining an equilibrium that is Pareto dominated is called the

Accepted Answer

In a prisoner's dilemma game, both players have a dominant strategy that leads to a Nash equilibrium that is Pareto dominated, meaning there exists an alternative outcome where both players are better off. This occurs when each player has an incentive to defect, even though mutual cooperation would result in a better outcome for both players. Therefore, the best choice is A) prisoner's dilemma game.

Question 15

A Nash equilibrium is a set of strategies, one for each player, in which _______________________ to change behavior given the behavior of the opponents.

Accepted Answer

In a Nash equilibrium, no player wishes to change their strategy given the behavior of their opponents. This means that all players are playing the best strategy they can given the strategies of the other players. If a player were to wish to change their strategy, then they would not be in a Nash equilibrium. Therefore, choice A is the correct answer.

Question 16

Backward induction is a description of a game of strategy that provides a detailed description of the rules of the game.

Accepted Answer

Backward induction is a method used in game theory to solve for the optimal strategies of players by analyzing the game from the end and moving backwards to infer each player's best action at each stage, rather than providing a detailed description of the game's rules.

Question 17

The remaining portion of the game tree at a given node of the larger game is known as backward induction.

Accepted Answer

Backward induction is a method used in game theory to solve games of perfect information, where players analyze the game from the end backwards to the start, not the remaining portion of the game tree at a given node.

Question 18

A dominant strategy is ______________ for a player no matter what the opposing players do.

Accepted Answer

A dominant strategy is the best strategy for a player, regardless of the actions taken by other players. It is their optimal choice regardless of the choices of the opposing players. Therefore, the best choice is always the option that corresponds to their dominant strategy.

Question 19

A game in which, when any player reaches a decision point, the player does not know all the choices of the other players who preceded is called a game of

Accepted Answer

In an imperfect information game, players do not know all the choices made by the other players before them. This adds an element of uncertainty and unpredictability to the game, as each player must make decisions based on incomplete information. Perfect information games, on the other hand, allow all players to know the complete history of the game up to that point, whereas zero information games involve no information at all.

Question 20

Noncooperative games ____________ possibility of communication or binding commitments.

Accepted Answer

Noncooperative games assume that players act independently and have no means of communication or commitment.

Quiz 11: Game Theory and the Tools of Strategic Business Analysis