Question 1

The non Pareto- optimal equilibria characterizing games of plain substitutes and complements:
A)yield conflicting results.
B)social interactions may lead to unattractive outcomes.
C)indicate that Adam Smith's invisible hand works properly.
D)imply that pursuing self- interest always achieve the full economic potential.

Accepted Answer

Non Pareto-optimal equilibria in games of plain substitutes and complements can lead to unattractive outcomes due to social interactions. This means that pursuing self-interest may not always achieve the full economic potential, contradicting answer choices C and D. However, conflicting results are not necessarily applicable here, as it is possible for the equilibria to be clear and distinct, but still not Pareto-optimal. Therefore, option B is the best choice.

Question 2

Which of the following is true?
A)Inefficient bribe- taking in highly regulated economies can be regarded as a game of plain substitutes.
B)The demand for bribes is an increasing function of the sum of bribes.
C)Inefficient bribe- taking in highly regulated economies result in bribes that are efficient.
D)Bribing is immoral but it has beneficial social role.

Accepted Answer

In highly regulated economies, there are often many regulations and bureaucratic hurdles that businesses or individuals have to navigate. The demand for bribes becomes a substitute for the time and effort it would take to navigate these hurdles. In this sense, inefficient bribe-taking can be seen as a game of plain substitutes, where the bribe is a substitute for the effort needed to comply with regulations.

B) The demand for bribes being an increasing function of the sum of bribes is not necessarily true and is not related to inefficient bribe-taking in highly regulated economies.

C) Inefficient bribe-taking does not result in bribes that are efficient. Inefficient bribe-taking means that bribes are being taken inefficiently, which can lead to an increase in the cost of doing business and a decrease in overall efficiency.

D) Whether or not bribing has a beneficial social role is a matter of debate and opinion, but it is not relevant to the topic of inefficient bribe-taking in highly regulated economies.

Question 3

The Nash equilibrium in a game of plain complements with simultaneous moves:
A)entails strategy values that "are too small".
B)entails strategy values that "are too large".
C)is Pareto- optimal.
D)results from a game of mutual negative externalities.

Accepted Answer

In a game of plain complements, players' strategies are complementary, meaning each player's optimal strategy increases with the level of the other player's strategy. In Nash equilibrium, players choose strategies that are lower than the socially optimal level because they do not account for the positive externality their strategy has on the other player, leading to strategy values that "are too small".

Question 4

A strategy combination:
A)is a list of strategies, one for each player in the game.
B)is a different name for a mixed strategy.
C)is a sophisticated strategy used by a player.
D)is a sequence of moves by a player .

Accepted Answer

A strategy combination is a list of strategies, one for each player in the game. It represents each player's plan of action in the game, based on their beliefs about the other players' behavior.

Question 5

A dominant strategy is:
A)always a winning strategy.
B)never part of a Nash equilibrium.
C)always part of a Nash equilibrium.
D)sometime part of a Nash equilibrium.

Accepted Answer

A dominant strategy is a strategy that gives the highest payoff for a player regardless of the choices made by the other players. In other words, it is always the best strategy no matter what the other players do. If every player has a dominant strategy, then those strategies will form a Nash equilibrium. Therefore, a dominant strategy is always part of a Nash equilibrium.

Question 6

Battle of the sexes is a:
A)game of chicken.
B)variant of the prisoner's dilemma game.
C)coordination game.
D)famous novel.

Accepted Answer

The Battle of the Sexes is a coordination game that illustrates a situation where two players benefit from coordinating their strategies but have different preferences on the outcome.

Question 7

The following mathematical properties should characterize the payoff functions:
A)discrete
B)continuous and quasi- concave
C)continuous and quasi- convex
D)bounded

Accepted Answer

Continuous and quasi-concave payoff functions are commonly used in economic models because they allow for a wide range of possible outcomes and can capture the diminishing marginal utility of wealth.

Question 8

Which of the following is true?
A)All games have at least a dominated strategy.
B)All games have at least a dominant strategy.
C)Games may or may not end up having dominated or dominating strategies.
D)A Nash equilibrium in pure strategies requires at least a dominating strategy.

Accepted Answer

Games may or may not have dominated or dominating strategies. It depends on the specific game and its rules. It is possible for a game to have neither dominated nor dominant strategies, or to have both. A Nash equilibrium in pure strategies does not require a dominating strategy; it is a situation where each player's strategy is optimal given the strategies of the other players, and it can occur even if no strategy dominates the others.

Question 9

A dominant strategy means that:
A)One player makes the best move given the move of the other player.
B)A player does not consider the moves available to the other player in making his decision.
C)It is the best response regardless of the strategy picked by the other player.
D)One player is aggressive while the other is passive.

Accepted Answer

A dominant strategy is the best response regardless of the strategy picked by the other player. It means that a player chooses the most optimal move for themselves, regardless of what the other player does.

Question 10

Cooperation is more likely to arise in repeated prisoner dilemma games:
A)when value the present gains highly.
B)when players are more patient.
C)when a one- time gain from cheating is large.
D)when players interact seldom.

Accepted Answer

Cooperation is more likely to arise in repeated prisoner dilemma games when players are more patient. This is because patient players are more willing to forego short-term gains from defecting and instead focus on the long-term benefits of cooperation. Over time, repeated interactions can build trust and encourage cooperation.

Question 11

The best response function is:
A)the strategy that increases the payoff.
B)the strategy that best uses the available information.
C)the strategy that leads to the highest payoff regardless of what the other players do.
D)the strategy that maximizes one's payoff given the action of the other players.

Accepted Answer

The best response function is the strategy that maximizes one's payoff given the action of the other players. This means that the player is responding to the actions of others in a way that will maximize their own payoff. Option A is not always the case as there may be instances where increasing one's payoff may not be the best approach. Option B may be relevant in some cases, but it is not a comprehensive definition of the best response function. Option C is incorrect as maximizing one's payoff may not always lead to the highest payoff in all situations. Therefore, answering with D is the most accurate.

Question 12

A Nash equilibrium occurs when:
A)each firm is doing the best it can given its opponents' actions.
B)there is no dominant firm in a market.
C)each firm chooses the strategy that maximizes its minimum gain.
D)a player can choose a strategy that is optimal regardless of its rivals' actions.

Accepted Answer

A Nash equilibrium occurs when each firm in a game is doing the best it can given its opponents' actions. In other words, no player can improve their payoff by unilaterally changing their strategy, assuming that all other players are playing their equilibrium strategies.

Question 13

If voting is costly yet it has no intrinsic value, voting in an election:
A)is a patriotic duty.
B)is a dominant strategy.
C)is a dominated strategy.
D)is neither a dominated strategy nor a dominant strategy.

Accepted Answer

Since voting is costly yet it has no intrinsic value, it is not rational to vote in an election. Therefore, voting is a dominated strategy because not voting dominates it - you incur no cost in not voting, yet you also do not gain any benefits from voting.

Question 14

The equilibrium arrived at in the prisoner's dilemma game is a:
A)Nash equilibrium.
B)Bertrand equilibrium.
C)collusive equilibrium.
D)Cournot equilibrium.

Accepted Answer

The equilibrium in the prisoner's dilemma game is a Nash equilibrium, which occurs when both players choose their best strategy given their opponent's choice. In this game, both players have a dominant strategy of defecting, which leads to the outcome of both players receiving a worse payoff than they would if they both cooperated. Therefore, the Nash equilibrium in this game is both players defecting.

Question 15

Which of the following types of games are likely to exhibit mixed strategy equilibria?
A)games of coordination
B)games of discoordination
C)any game that is properly formatted.
D)prisoner dilemma games.

Accepted Answer

The answer of Which of the following types of games...

Question 16

In the game of PUT (P)and KEEP (K)each child was given nine dollars and, if they chose to put it back, six dollars was added to the nine and the two children shared the total pot of money. What is the dominant strategy?
A)(K, K)
B)(P, K)
C)(K, P)
D)(P, P)

Accepted Answer

The dominant strategy is to keep the money, regardless of what the other player does. If both players keep the money, they each get $9. If one player puts the money back and the other keeps it, the player who kept the money gets $15 and the player who put the money back gets $0. If both players put the money back, they each get $7.50. Therefore, the dominant strategy is to keep the money.

Question 17

The prisoner's dilemma:
A)is characterized by several Nash equilibria.
B)yields a Pareto- optimal equilibrium.
C)can be used to model a variety of economic settings.
D)does not have many real- life applications.

Accepted Answer

The prisoner's dilemma is a widely used game theory model that can be applied to various economic and social situations, such as pricing competition between firms, negotiation between countries, and cooperation between individuals. The game can have multiple Nash equilibria, but they may not be Pareto-optimal.

Question 18

A dominant strategy is one that:
A)combines pure and mixed strategies.
B)is chosen by the player regardless of the best response by the other player.
C)brings losses for the player.
D)restricts the freedom of choice.

Accepted Answer

A dominant strategy is one that is chosen by the player regardless of the best response by the other player. Therefore, it is always the best choice for the player to use the dominant strategy, as it ensures the highest possible payoff regardless of what the other player does.

Question 19

A coordination game:
A)covers most market situations.
B)cannot yield a Nash equilibrium.
C)usually has more than one equilibrium.
D)result in a final outcome that is uncertain.

Accepted Answer

A coordination game usually has multiple equilibria, where each player chooses a strategy that aligns with the other players' choice. As a result, the final outcome is uncertain because it depends on which equilibrium is reached.

Question 20

The Nash equilibrium in a prisoner's dilemma game:
A)has few real- life applications.
B)does not necessarily lead to jail time for the players.
C)is the set of the dominant strategies for all players.
D)is Pareto- optimal.

Accepted Answer

The Nash equilibrium in a prisoner's dilemma game is the set of strategies where no player can benefit by changing their strategy while the other players keep theirs unchanged, which often corresponds to the dominant strategies for all players.

Quiz 15: Introduction to Game Theory

The non Pareto- optimal equilibria characterizing games of plain substitutes and complements:

Which of the following is true?

The Nash equilibrium in a game of plain complements with simultaneous moves:

A strategy combination:

A dominant strategy is:

Battle of the sexes is a:

The following mathematical properties should characterize the payoff functions:

Which of the following is true?

A dominant strategy means that:

Cooperation is more likely to arise in repeated prisoner dilemma games:

The best response function is:

A Nash equilibrium occurs when:

If voting is costly yet it has no intrinsic value, voting in an election:

The equilibrium arrived at in the prisoner's dilemma game is a:

Which of the following types of games are likely to exhibit mixed strategy equilibria?

In the game of PUT (P) and KEEP (K) each child was given nine dollars and, if they chose to put it back, six dollars was added to the nine and the two children shared the total pot of money. What is the dominant strategy?

The prisoner's dilemma:

A dominant strategy is one that:

A coordination game:

The Nash equilibrium in a prisoner's dilemma game: