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1 | |
An analytical guide or tool for making decisions in situations involving interdependence is known as... |
| | A) | a payoff table. |
| | B) | strategic entry deterrence. |
| | C) | game theory. |
| | D) | a decision node. |
| | E) | limit pricing. |
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2 | |
Situations in which competing firms must make their individual decisions without knowing the decisions of their rivals are known as... |
| | A) | sequential decisions. |
| | B) | simultaneous decision games. |
| | C) | dominated strategies. |
| | D) | strategic deterrence. |
| | E) | none of the above |
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3 | |
When both players have dominant strategies and play them, the result is: |
| | A) | dominant strategy equilibrium |
| | B) | Nash equilibrium |
| | C) | strategic stability |
| | D) | successive elimination of dominated strategies |
| | E) | none of the above |
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4 | |
Nash decisions are likely to be chosen because... |
| | A) | Nash decisions are strategically stable. |
| | B) | they represent a set of actions for which all managers are choosing their best actions given the actions chosen by their rivals. |
| | C) | both players have dominant strategies and play them. |
| | D) | both a and b |
| | E) | both a and c |
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5 | |
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What is Firm A's dominant strategy? |
| | A) | Price high. |
| | B) | Price low. |
| | C) | Firm A does not have a dominant strategy. |
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6 | |
What is Firm B's dominant strategy? |
| | A) | Price high. |
| | B) | Price low. |
| | C) | Firm B does not have a dominant strategy. |
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7 | |
What do you predict will be the outcome of this simultaneous decision? |
| | A) | Image Here |
| | B) | Image Here |
| | C) | Image Here |
| | D) | Image Here |
| | E) | Impossible to tell from the information given in the table. |
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8 | |
Is this decision a prisoners' dilemma? |
| | A) | Yes, since when both firms choose their dominant strategies they each are worse off than if they could cooperate. |
| | B) | Yes, since when both firms choose their dominant strategies they each are better off then if they could cooperate. |
| | C) | No, since when both firms choose their dominant strategies they each are worse off than if they could cooperate. |
| | D) | No, since the likely outcome is strategically stable. |
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9 | |
The next seven questions refer to the following payoff table.
What dominant strategies exist in the original payoff table above? |
| | A) | Firm A Medium |
| | B) | Firm B High |
| | C) | Firm B Medium |
| | D) | Firm A Low |
| | E) | There are no dominant strategies. |
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10 | |
Using the method of successive elimination of dominated strategies, which strategies, if any, are eliminated after the first round? |
| | A) | Firm A High |
| | B) | Firm B Low |
| | C) | both a and b |
| | D) | No strategies are eliminated after the first round. |
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11 | |
After the first round of elimination, are there any more dominated strategies to eliminate? If so, which one(s)? |
| | A) | Firm A low |
| | B) | Firm B High |
| | C) | Firm B Medium |
| | D) | both b and c |
| | E) | Neither firm has dominated strategies after the first round. |
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12 | |
After the first round of elimination, are there any dominant strategies? If so, which one(s)? |
| | A) | Firm A High |
| | B) | Firm A High |
| | C) | Firm B Medium |
| | D) | both a and c |
| | E) | Neither firm has a dominant strategy after the first round. |
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13 | |
Which cell in the payoff table represents the likely outcome of this advertising game? |
| | A) | Cell A (Low, Low) |
| | B) | Cell C (Low, High) |
| | C) | Cell I (High, High) |
| | D) | Cell E (Medium, Medium) |
| | E) | Cell H (High, Medium) |
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14 | |
Is the likely outcome a Nash equilibrium? |
| | A) | Yes, since the outcome represents the mutually best pair of decisions. |
| | B) | No, since the outcome represents the mutually best pair of decisions. |
| | C) | Yes, since this situation is a prisoners' dilemma. |
| | D) | No, since the outcome does not represent the mutually best pair of decisions. |
| | E) | Unable to tell from the information given. |
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15 | |
Is the likely outcome strategically stable? |
| | A) | Yes, since both firms applied their dominant strategies. |
| | B) | No, since this situation represents a prisoners' dilemma. |
| | C) | Yes, since neither firm can, by itself, make a different decision and reach a higher level of profit. |
| | D) | No, since both firms can, unilaterally, make a different decision and reach a higher level of profit. |
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16 | |
In every prisoners' dilemma situation, cooperation is... |
| | A) | impossible. |
| | B) | possible. |
| | C) | reduces the payoff to all players. |
| | D) | both a and c. |
| | E) | both b and c. |
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17 | |
In an oligopoly market, cooperation is achieved when... |
| | A) | each firm in the market decides not to cheat. |
| | B) | a majority of firms in the market decides not to cheat. |
| | C) | an explicit agreement not to cheat is reached by at least two firms in the market. |
| | D) | a pricing agreement is reached in which one firm in the market sets a price that the other firms match. |
| | E) | none of the above |
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18 | |
Price matching... |
| | A) | must be reversible to be credible. |
| | B) | must be irreversible to be credible. |
| | C) | is not a strategic commitment. |
| | D) | both a and c |
| | E) | both b and c |
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19 | |
In a repeated decision for which the present value of the benefits of cheating are greater than the present value of the costs of cheating, |
| | A) | deciding to cooperate is a value-maximizing decision. |
| | B) | deciding to cheat is a value-maximizing decision. |
| | C) | deciding to cheat is never a value-maximizing decision. |
| | D) | both a and c |
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20 | |
Which of the following conditions make it LESS likely that a cartel will succeed? |
| | A) | a small number of cartel members. |
| | B) | the lack of an explicit agreement among cartel members. |
| | C) | similar cost structures among cartel members. |
| | D) | differentiated cost structures among cartel members. |
| | E) | none of the above |
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21 | |
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Does this decision represent a prisoners' dilemma? |
| | A) | Yes, since only one firm has a dominant strategy. |
| | B) | Yes, since both firms have a dominant strategy. |
| | C) | No, since both firms have a dominant strategy. |
| | D) | No, since there is no incentive to cheat. |
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22 | |
Which cell(s) represent cheating in the pricing decision? |
| | A) | Pizza Shed cheats in Cell C |
| | B) | Pizza Shed cheats in Cell D |
| | C) | Pizza Shack cheats in Cell B |
| | D) | both a and c |
| | E) | both b and c |
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23 | |
If Pizza Shed and Pizza Shack make their pricing decisions just one time, |
| | A) | no punishment is possible for cheating. |
| | B) | dominant strategy equilibrium occurs. |
| | C) | Nash equilibrium occurs. |
| | D) | all of the above |
| | E) | none of the above |
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24 | |
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Which price and level of output maximize the cartel's profit? |
| | A) | $30; 2,500 |
| | B) | $55; 2,500 |
| | C) | $50; 3,000 |
| | D) | $40; 2,000 |
| | E) | none of the above |
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25 | |
How should the total cartel output be allocated between the two firms? |
| | A) | 1,500 to Firm A; 1,000 to Firm B |
| | B) | 1,500 to Firm A; 1,500 to Firm B |
| | C) | 1,000 to Firm A; 1,500 to Firm B |
| | D) | 1,000 to Firm A; 1,000 to Firm B |
| | E) | 500 to Firm A; 1,500 to Firm B |
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