Deck 9: Strategic Thinking Part III: Imperfect Markets

Question 1

Compare your decision to buy a house on the resale market vis-à-vis a new tablet computer on Taobao. Which decision, if any, is strategic?

A) Buying the house.
B) Buying the tablet computer.
C) Both decisions.
D) None of the above.

Answer 1

A

Question 2

If my competitor maintains price, I can increase my profit by cutting price. If my competitor cuts price, I can also increase my profit by cutting price. Use the terminology of game theory to describe the strategy of maintaining price.

A) Dominating strategy.
B) Dominated strategy.
C) Nash equilibrium strategy.
D) Randomized strategy.

Answer 2

B

Question 3

The game in strategic form below describes the competition between Luna and Solis in the market for mobile services. Each provider must decide whether to launch 5G services. The cells describe the profits in billion dollars. Identify the Nash equilibrium or equilibria in pure strategies.

A) Luna: Launch. Solis: Launch.
B) Luna: Launch. Solis: Do not launch.
C) Luna: Do not launch. Solis: Launch.
D) Luna: Do not launch. Solis: Do not launch.

Answer 3

A

Question 4

The game in strategic form below describes the situation between Northland and Southland. Each must decide whether to reduce carbon emissions. The cells describe national welfare in billion dollars. Identify the Nash equilibrium or equilibria in pure strategies.

A) Northland: Maintain. Southland: Maintain.
B) Northland: Maintain. Southland: Reduce.
C) Northland: Reduce. Southland: Maintain.
D) a and c.
E) b and c.

Question 5

When he served, tennis champion Roger Federer would turn away from his opponent, and toss the ball in the same way. Andy Roddick lamented that he could never tell whether Federer would serve to the left or right. Use game theory to explain Federer's strategy.

A) Federer used a Nash equilibrium strategy.
B) Federer used a non-equilibrium strategy.
C) Federer used a randomized strategy.
D) a and b.
E) b and c.

Question 6

Suppose that you put up your house for sale. Is the situation between you and a potential buyer a zero-sum game?

A) Yes, for me to get $1,000 more, the buyer must give up $1,000.
B) No, if I sell, the price exceeds my value of the house, and for the buyer, the value exceeds the price.
C) None of the above.

Question 7

Your company and a competitor are deciding whether to invest in electric car charging networks. The networks would duplicate each other, and if both companies were to invest, they would both incur losses. Your boss is thinking of being first to commit the investment. Which model of game theory should you use to analyze this situation?

A) Game in strategic form.
B) Nash equilibrium.
C) Game in extensive form.
D) a and b.
E) a, b, and c.

Question 8

In 207 BC, Xiang Yu led a small force to attack the larger Qin army at Julu. Upon crossing the Zhang river, Xiang Yu ordered his men to sink their boats and destroy the cooking utensils. He distributed just three days' rations to his men. Use game theory to explain Xiang Yu's orders.

A) Xiang Yu carried out a strategic move.
B) Xiang Yu carried out a threat (conditional strategic move).
C) Xiang Yu carried out a Nash equilibrium strategy.
D) None of the above.

Question 9

Compare two ways by which a car manufacturer can adapt to climate change. Build a factory to produce electric cars. Announce at the Annual General Meeting, that by 2030, half of all production would be electric cars. Which would persuade investors relatively more?

A) Building the factory.
B) Announcement.
C) a and b.

Question 10

Lithography is a process by which the artist creates a design on stone or plate, and then prints artwork. Buyers of lithographs worry that the artist would print more copies in the future. Suppose that a well-known gallery promises to buy back the artist's prints at the original price. If the artist prints more copies, buyers can sell their purchases back to the gallery. Use game theory to explain.

A) The buyback offer is a strategic move.
B) The buyback offer is a promise (conditional strategic move).
C) The buyback offer is a threat (conditional strategic move).
D) a and b.
E) a and c

Question 11

Compare your decision to buy a house on the resale market vis-à-vis a new tablet computer on Taobao. Explain why one decision is strategic and the other is not.

Question 12

If my competitor maintains price, I can increase my profit by cutting price. If my competitor cuts price, I can also increase my profit by cutting price. Use the terminology of game theory to describe the strategy of maintaining price.

Question 13

The game in strategic form below describes the competition between Luna and Solis in the market for mobile services. Each provider must decide whether to launch 5G services. The cells describe the profits in billion dollars. Identify the Nash equilibrium or equilibria in pure strategies.

Question 14

The game in strategic form below describes the situation between Northland and Southland. Each must decide whether to reduce carbon emissions. The cells describe national welfare in billion dollars. Identify the Nash equilibrium or equilibria in pure strategies.

Question 15

When he served, tennis champion Roger Federer would turn away from his opponent, and toss the ball in the same way. Andy Roddick lamented that he could never tell whether Federer would serve to the left or right. Use game theory to explain Federer's strategy.

Question 16

Suppose that you put up your house for sale. Is the situation between you and a potential buyer a zero-sum game?

Question 17

Your company and a competitor are deciding whether to invest in electric car charging networks. The networks would duplicate each other, and if both companies were to invest, they would both incur losses. If only one company invests, it would profit. Your boss is thinking of moving first. How would you use game theory to advise her?

Question 18

In 207 BC, Xiang Yu led a small force to attack the larger Qin army at Julu. Upon crossing the Zhang river, Xiang Yu ordered his men to sink their boats and destroy the cooking utensils. He distributed just three days' rations to his men. Use game theory to explain Xiang Yu's orders.

Question 19

Compare two ways by which a car manufacturer can adapt to climate change. Build a factory to produce electric cars. Announce at the Annual General Meeting, that by 2030, half of all production would be electric cars. Which would persuade investors relatively more?

Question 20

Lithography is a process by which the artist creates a design on stone or plate, and then prints artwork. Buyers of lithographs worry that the artist would print more copies in the future. Suppose that a well-known gallery promises to buy back the artist's prints at the original price. How would this resolve the buyers' concern?