Deck 12: A Game-Theoretic Approach to Strategic Behavior

Question 1

One difficulty is that tit-for-tat's effectiveness depends on the existence of

A)perfect information about another's actions.
B)only two players in the game.
C)an infinite number of players in the game.
D)an industry that is not growing.

Answer 1

B

Question 2

You are given the four payout option show below for a coin toss. If you are using a maximum strategy, which option do you choose?

A)Heads you win $500, tails you lose $100
B)Heads you win $1,000, tails you lose $110
C)Heads you win $50, tails you lose $25
D)Heads you win $5, tails you lose $0

Answer 2

D

Question 3

Given the following: if Shirley believes Betsy will behave in a self-interested way, Shirley will

A)predict that Betsy will cooperate, and so Shirley will also cooperate.
B)predict that Betsy will cooperate, and so Shirley will decide to defect.
C)predict that Betsy will defect, and so Shirley will also defect.
D)predict that Betsy will defect, and so Shirley will decide to cooperate.

Answer 3

predict that Betsy will defect, and so Shirley will also defect.

Question 4

In the prisoner's dilemma exercise, the strategy that is assumed to result is which of the following?

A)The prisoners will discuss the problem ahead of time and trust each other to cooperate.
B)The prisoners will discuss the problem ahead of time and then both cheat on each other.
C)The prisoners will develop a foolproof commitment device and then both confess.
D)The prisoners will individually decide it is in their interest to confess.

Question 5

The prisoner's dilemma exercise assumes

A)prisoners are rational.
B)prisoners are altruistic to each other if they know each other well.
C)prisoners believe other prisoners are different then they themselves are.
D)prisoners do not know what the penalties are when they are interrogated.

Question 6

The conditions discussed by Axelrod show that in the tit-for-tat strategy

A)people are most likely to defect.
B)people always cooperate.
C)people cooperate most of the time but defect under certain conditions.
D)in trench warfare, defection is the usual practice.

Question 7

The unraveling problem in interdependent relationships arises from a situation in which

A)there is a known, finite number of future interactions.
B)there is not a known, finite number of future interactions.
C)interactions suddenly and surprisingly cease.
D)a recession hits an industry.

Question 8

If two tit-for-tat players interact together over a long period of time, the result will be

A)cooperation.
B)defection.
C)zero payouts for both.
D)lower payouts for both.

Question 9

The strategy of tit-for-tat is

A)to cooperate for the first interaction, and to defect for each subsequent interaction.
B)to cooperate for the first interaction, and to imitate your rival's behavior in each subsequent interaction.
C)to defect for the first interaction, and to cooperate for each subsequent interaction.
D)to always be the first one to defect.

Question 10

In game theory, a dominant strategy is one

A)in which the firm gains the greatest competitive advantage.
B)in which the same strategy is chosen by one firm regardless of the anticipated action of the other firm.
C)that produces the greatest comparative advantage.
D)that both firms agree on independently.

Question 11

In a battle of Boeing and Airbus, a Nash equilibrium will exist if

A)they both have agreed to a monopoly pricing structure.
B)they are presently operating at a point where neither one would benefit by unilaterally changing strategies.
C)Boeing has the power to drive Airbus out of business with a predatory pricing strategy.
D)both pass up profit opportunities because they fear retaliation.

Question 12

In the doves and hawks society, there is a place for the doves because

A)there is more waste in joint production processes when participants cooperate.
B)doves do not well when paired with other doves.
C)hawkish behavior can be damaging even to hawks.
D)there are always more doves and hawks.

Question 13

In the payoff matrix below, the Nash equilibrium for the game is

A) for both players to follow strategy A.
B) for both players to follow strategy B.
C) for player 2 to follow strategy A and for player 2 to follow strategy B.
D) There is no Nash equilibrium in this game

Question 14

If prisoners X and Y in the table could develop a credible commitment device, then we would expect
                                    $\text { Prisoner } Y$
$\begin{array}{l}\begin{array} { l } \\\text { Prisoner X} & \text { confess}\\\\ & \text { remain silent}\end{array}\begin{array} { l } \hline \text { confess } & \text { remain silent } \\\hline 10 \text { years each } & \begin{array}{l}0 \text { years for } X \\30 \text { years for } Y\end{array} \\\hline \begin{array}{l}0 \text { years for } Y \\30 \text { years for } X\end{array} & \text { 2 years for each } \\\hline\end{array}\end{array}$

A)both prisoners to remain silent.
B)both prisoners to confess.
C)no specific strategy to dominate their decisions.
D)X will confess and Y will remain silent.

Question 15

In sequential games

A)players move at the same time.
B)the order of moves matter.
C)the order of the moves is irrelevant.
D)there is always two Nash equilibriums.

Question 16

In sequential game strategies, each player could avoid the worst case outcomes by

A)assuming that the other player will always rationally avoid its worst case outcome.
B)pursuing a strategy that leads toward the highest end point gains possible.
C)pursuing a strategy that leads in the direction of the worst case scenario.
D)the strategies listed in both assuming that the other player will always rationally avoid its worst case outcome and pursuing a strategy that leads toward the highest end point gains possible because they will definitely keep one from the worst case scenario.

Question 17

A tit for tat strategy has the best chance of working if

A)a transaction is a one-time event.
B)the interaction between participants is frequent and open-ended.
C)the interaction is frequent, but has a specific end date.
D)neither side in the interaction trusts the other's commitment to the strategy.

Question 18

What is the strategy we would expect from X and Y in the following prisoner's dilemma?
                                    $\text { Prisoner } Y$
$\begin{array}{l}\begin{array} { l } \\\text { Prisoner X} & \text { confess}\\\\ & \text { remain silent}\end{array}\begin{array} { l } \hline \text { confess } & \text { remain silent } \\\hline 10 \text { years each } & \begin{array}{l}0 \text { years for } X \\30 \text { years for } Y\end{array} \\\hline \begin{array}{l}0 \text { years for } Y \\30 \text { years for } X\end{array} & \text { 2 years for each } \\\hline\end{array}\end{array}$

A)Both prisoners to remain silent.
B)Both prisoners will confess.
C)There is no single predictable strategy.
D)X will confess and Y will remain silent.

Question 19

In a prisoner's dilemma game, a dominant strategy would mean that one of the players

A)follows the moves of the opponent no matter what the opponent does.
B)knows the payoff matrix outcomes while the other does not.
C)is sure to come out with the most preferred outcome no matter what the other does.
D)will benefit most from one particular move no matter what the opponent does.

Question 20

In game theory, a player following a maximum strategy

A)picks the strategy with the best of all the worst possible outcomes.
B)picks the strategy with the highest payoff from all the options.
C)is indifferent to all strategies so a strategy is picked randomly.
D)is altruistic and picks a strategy that maximizes the other players' outcome.

Question 21

In a management class there are two types of students, the individualists and the socialites. There is a group term project that is worked on jointly but then individually summarized and handed in for a grade. When individualists end up in the same group, they all get B- since they are not very inclined to share their insights with each other. When the socialites work together, they all get A- because they learn from each other and have more to say when they each write up a report. When individualists and socialites work in a group, the individualists learn from the socialites but share little, so the individualists get an A and the socialites get a
C.The students with the best grades are the ones who stay on in school.From this information answer the following questions.If the teacher allows students to choose partners for a 1/3 letter grade penalty, what will happen to the student body population.Draw another payoff graph and show the proportion of socialites and individualists on the graph.You cannot use a numerical percentage because the letter grades are not numerically specified.Simply label the horizontal axis with an X at the left side and a Y on the right side and a Z where the proportion of socialites will be fixed.The percentage population then becomes XZ/XY.

Question 22

In a management class there are two types of students, the individualists and the socialites. There is a group term project that is worked on jointly but then individually summarized and handed in for a grade. When individualists end up in the same group, they all get B- since they are not very inclined to share their insights with each other. When the socialites work together, they all get A- because they learn from each other and have more to say when they each write up a report. When individualists and socialites work in a group, the individualists learn from the socialites but share little, so the individualists get an A and the socialites get a
C.The students with the best grades are the ones who stay on in school.From this information answer the following questions.If the teacher allows the students to pick their team partners without a grade penalty, what will the population of the class eventually become? Draw a payoff graph again showing this outcome.

Question 23

For the sake of argument, assume that the rules of the cooperator/defector game are defined in such a way that hawks (competitors) are denied the use of violence or force and that competition is conditioned by the rule of law. This might approximate a highly competitive capitalist society. If everyone is a hawk in this world, describe the conditions necessary for this society to have all hawks permanently.

Question 24

In evolutionary models, where each individual reproduces in proportion to its average payoff, and if defectors working with cooperators get higher returns than cooperators working together, and if cooperators and defectors look exactly alike, then

A)cooperators are destined for extinction.
B)defectors are destined for extinction.
C)an equilibrium will result with more than half of the population being cooperators.
D)there will be no change in the population proportions from the starting point.

Question 25

Your text suggests that cigarette companies advertise too much. This is because they

A)do not know what the payoff options are.
B)seek to convince customers to switch brands and they have a dominant strategy to advertise in this case.
C)are pursuing a tit-for-tat strategy and are engaged in destructive behavior.
D)make the most money collectively if they advertise and increase the total market.

Question 26

This question refers to the payoff matrix below where profits for United Airlines and American airlines are shown for alternative pricing strategies. The airlines can either hold prices where they are or engage in price cutting activity.
In the payoff matrix above, if the lower right cell has 85's for each company instead of 70's, would either have a dominant strategy then?

Question 27

In evolutionary models, where each individual reproduces in proportion to its average payoff and cooperators working together do better than defectors working together, if cooperators are perfectly distinguishable from defectors, then

A)cooperators are destined for extinction.
B)defectors are destined for extinction.
C)an equilibrium will result with more than half of the population being defectors.
D)there will be no change in the population proportions from the starting point.

Question 28

This question refers to the payoff matrix below where profits for United Airlines and American airlines are shown for alternative pricing strategies. The airlines can either hold prices where they are or engage in price cutting activity.
Is there a Nash equilibrium?

Question 29

The Cold War example in your text illustrated several important points about sequential games. Which was not one of those points?

A)Actors must know the values of the payoff tree.
B)A doomsday device by one party can offset a bad outcome that pure rationality by all parties would dictate.
C)One party might accept a worse outcome than the rational outcome in order to punish the opposing party or to maintain parity between the parties involved.
D)The final outcome will be the same whether the parties are rational or not.

Question 30

The hawks and doves example illustrated in the textbook shows that an important property of evolution by natural selection is that traits are often favored by their effects

A)on individual payoffs.
B)on population payoffs.
C)regardless of the payoffs.
D)and not on the costs to obtain those traits.

Question 31

The hawks and doves example illustrated in the textbook show how the usefulness of a certain mode of behavior depends on

A)the frequency with which others also prefer that behavior.
B)the frequency of that behavior.
C)the scarcity of resources available.
D)the number of doves at any moment.

Question 32

Suppose you have been assigned to complete a group project with one of your classmates. Each of you can choose to Shirk or Work. If one or more of you chooses to Work, the project is completed and provides each with extra credit valued at 4 payoff units each. The cost of completing the project is that 6 total units of effort (measured in payoff units) divided equally among all players who choose to Work and this is subtracted from their payoff. If both of you Shirk, then neither of you have to expend any effort but the project is not completed, giving each a payoff of 0. The teacher can only tell whether the project is completed and not which students contributed to it. What is the dominant strategy for you?

A)Work
B)Shirk
C)There is no dominant strategy.
D)Work if your friend also works.

Question 33

Consider a population with the following givens: 1) 75% cooperators and 25% defectors
2) a 8 unit payoff goes to cooperators who interact with another cooperator
3) a zero unit payoff goes to a cooperator who interacts with a defector
4) the cost of knowing which is 2
If the population balance rises above 75%,

A)it will no longer make sense for cooperators to pay the price of scrutiny.
B)defectors will have a lower payoff.
C)cooperators will all pay the cost of scrutiny.
D)defectors will all pay the cost of scrutiny.

Question 34

Consider a population with the following givens: 1) 75% cooperators and 25% defectors
2) a 8 unit payoff goes to cooperators who interact with another cooperator
3) a zero unit payoff goes to a cooperator who interacts with a defector
4) the cost of knowing which is 2
If the population balance falls below 75%,

A)it will no longer make sense for cooperators to pay the price of scrutiny.
B)defectors will have a higher payoff.
C)cooperators will all pay the cost of scrutiny.
D)less than 75% of the cooperators will pay the cost of scrutiny.

Question 35

According to the textbook, the real difficulty with prisoners' dilemma is

A)that the prisoners cannot communicate with each other.
B)lack of trust between the two prisoners.
C)that both prisoners are wrongly convicted.
D)irrational behavior on the part of the prisoners.

Question 36

Describe a situation where you have been a cooperator and explain how the commitment problem was solved. In other words, how did you know your partner would not cheat?

Question 37

In a society consisting of 75% cooperators and 25% defectors, with an 8-unit payoff to a cooperator who interacts with another cooperator and a 0-unit payoff to the cooperator who interacts with a defector, if the cost of scrutiny is 2, the cooperator

A)should pay the cost of scrutiny even if it were 3.
B)should not interact with either cooperators or defectors.
C)should not pay the cost of scrutiny.
D)will break even by paying the cost of scrutiny.

Question 38

This question refers to the payoff matrix below where profits for United Airlines and American airlines are shown for alternative pricing strategies. The airlines can either hold prices where they are or engage in price cutting activity.
Does either airline have a dominant strategy? If so, what is it?

Question 39

Which is true of a Nash equilibrium?

A)Both parties must have a dominant strategy for the equilibrium to exist.
B)Neither party must have a dominant strategy but each must know the payoff values.
C)Only one party must have a dominant strategy but the other party must know what that is.
D)Only one party must have a dominant strategy and the other need not know what that is.

Question 40

In a management class there are two types of students, the individualists and the socialites. There is a group term project that is worked on jointly but then individually summarized and handed in for a grade. When individualists end up in the same group, they all get B- since they are not very inclined to share their insights with each other. When the socialites work together, they all get A- because they learn from each other and have more to say when they each write up a report. When individualists and socialites work in a group, the individualists learn from the socialites but share little, so the individualists get an A and the socialites get a
C.The students with the best grades are the ones who stay on in school.From this information answer the following questions.Assuming that there is a numerical grading scale between all the letter grades, draw a payoff graph assuming that the groups are randomly chosen and indicate what the population of students in the class will eventually become.

Question 41

Describe a situation in which you were a defector. Did your partners know you were a defector or did you fool them?