Deck 8: When Other Firms React

Question 1

A prisoner's dilemma is

A)stable.
B)the best equilibrium possible.
C)inefficient.
D)efficient.

Answer 1

inefficient.

Question 2

The two types of games include

A)fast and slow.
B)sequential and simultaneous.
C)price and quantity.
D)real and nominal.

Answer 2

sequential and simultaneous.

Question 3

In a sequential game

A)a player has to look forward and reason forward.
B)a player has to look forward and reason back.
C)a player has to look back and reason forward.
D)a player has to look back and reason back.

Answer 3

a player has to look forward and reason back.

Question 4

In a sequential game

A)players try to figure out an opponent's future response in making their own moves.
B)all players make decisions at the same time.
C)players draw lots and take turns.
D)players figure out their own moves and then forecast their following moves.

Question 5

The purpose of convention is

A)to create a Nash game.
B)to determine one equilibrium out of a multi-equilibrium situation.
C)to offer multiple choices to players.
D)all of these choices.

Question 6

If a player has a strategy where one course of action under-performs all others no matter what other players do, that strategy is

A)a prisoner's dilemma.
B)dominated.
C)dominant.
D)a loser.

Question 7

When a game is played repeatedly

A)only customers learn.
B)customers and firms are both able to learn.
C)firms end up colluding.
D)a prisoner's dilemma will be the equilibrium.

Question 8

Strategic behavior

A)is found in competitive markets.
B)is a form of product differentiation.
C)involves the interdependence of actions.
D)is only present when there are price fixing agreements.

Question 9

A prisoner's dilemma exists when

A)all parties are as well off as possible.
B)all parties are worse off than would be the case if the parties could agree to another set of behaviors.
C)all but one party is worse off.
D)there are no benefits at all from any strategy.

Question 10

When outcomes are uncertain

A)people always look for the sure thing.
B)people are willing to pay risk premiums.
C)people often need to be paid a risk premium before they take a certain course.
D)none of these choices.

Question 11

Often, when no player has a dominant strategy

A)there is a dominated strategy.
B)there is a chance for circular reasoning.
C)then another player is needed.
D)then there is a competitive market.

Question 12

The ways to escape a prisoner's dilemma is to

A)make commitments and play the game repeatedly.
B)collude.
C)find a dominant strategy.
D)give up the game.

Question 13

A commitment

A)is a promise.
B)is a contractual arrangement between parties.
C)is when one party states that they will not play a game that ends in a prisoner's dilemma.
D)is when a party states that they will engage in a certain type of behavior regardless of what others do.

Question 14

The components of a game include

A)the number of players.
B)a set of implicit rules.
C)perceptions and boundaries.
D)all of these choices are included.

Question 15

In a simultaneous game,

A)players have the benefit of seeing the moves of others before they make their moves.
B)every player is looking forward and reasoning forward.
C)one player has to go first.
D)players do not have the benefit of observing the moves of other players before making their own.

Question 16

Given that the world is filled with uncertainty

A)managers need to assess the probabilities of certain outcomes.
B)managers need to avoid using game theory, as it is too complex to be of any help.
C)managers need to hire statisticians to calculate expected values.
D)none of these choices.

Question 17

If a player has a strategy where one course of action outperforms all others no matter what other players do, that strategy is

A)a prisoner's dilemma.
B)dominated.
C)dominant.
D)a winner.

Question 18

Forms of commitments include

A)warranties.
B)guarantees.
C)advertising expenditures.
D)all of these choices are forms of commitments.

Question 19

"Tit-for-tat" is

A)a form of prisoner's dilemma.
B)the process in which games find equilibrium.
C)a way to enforce a cooperative game.
D)a child's game.

Question 20

If there is a combination of strategies in which each player's action is the best response to the actions of other players, then there is

A)a Boyes equilibrium.
B)an unstable equilibrium.
C)a complementary equilibrium.
D)a Nash equilibrium.

Question 21

In a simultaneous game, players look forward and think back.

Question 22

Dominant strategies are often difficult to take because a better alternative could exist.

Question 23

Sunk costs can be commitments.

Question 24

Firms still have the incentive to cheat even after a game leads to cooperation.

Question 25

Sequential games provide the opportunity to use real options.

Question 26

In a Nash equilibrium no player wants to change his or her strategy.

Question 27

When an outcome is weighted by a probability, it becomes an expected value.

Question 28

Strategic behavior is the result of an interdependent world.

Question 29

Repeated games often lead to cooperation.

Question 30

A commitment is a form of strategy.

Question 31

Firms look for dominated strategies in order to gain the upper hand on competitors.

Question 32

Companies cannot avoid prisoner dilemmas.

Question 33

As the number of players grows, the costs of game playing fall.

Question 34

Game theory assumes rational behavior on the part of the players.

Question 35

"Tit-for-tat" prevents cheating.