The next 6 questions refer to the following payoff table.
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| 5 | |
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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| 6 | |
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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| 7 | |
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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| 8 | |
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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| 9 | |
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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| 10 | |
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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| 11 | |
At the point of intersection of two best-response curves, each manager… |
| | A) | is making the greatest possible individual profit. |
| | B) | is unable to reach a Nash equilibrium. |
| | C) | has acted to maximize total industry profit. |
| | D) | is unable to achieve a higher payoff through any unilateral change of strategy. |
| | E) | both b and d |
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| 12 | |
A second-mover advantage occurs… |
| | A) | when there is not a first-mover advantage in a sequential decision. |
| | B) | when a firm can earn greater profit by reacting to earlier decisions made by rivals. |
| | C) | because rivals have imperfect information about payoffs. |
| | D) | both a and b |
| | E) | none of the above |
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| 13 | |
In sequential decision making situations, using the roll-back method… |
| | A) | allows the decision maker going second to predict what the decision maker going first will do. |
| | B) | allows predictions about what the decision maker going second will do to be used by the decision maker going first. |
| | C) | results in a Nash equilibrium. |
| | D) | both a and c |
| | E) | both b and c |
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| 14 | |
Price leadership… |
| | A) | is not useful to a dominant firm if it could eliminate all its rivals through a price war. |
| | B) | is an arrangement in which one firm in the market sets a price that the other firms match. |
| | C) | occurs when a group of firms agree to limit competitive forces in the market. |
| | D) | is when a firm makes a noncooperative decision to raise its price. |
| | E) | none of the above |
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| 15 | |
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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| 16 | |
A credible commitment is… |
| | A) | always irreversible. |
| | B) | an unconditional strategic move. |
| | C) | a way of becoming the first-mover in sequential decision situation. |
| | D) | all of the above |
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| 17 | |
A conditional strategic move, such as a threat or promise, can be credible only if |
| | A) | it can increase each firm's payoff. |
| | B) | when the time comes to carry out the threat or promise, fulfilling the threat or promise is in the best interest of the firm making the threat or promise. |
| | C) | rivals believe the manager making the threat or promise can be trusted to follow through on any commitment, threat, or promise that he or she makes. |
| | D) | the strategic move harms rivals. |
| | E) | none of the above. |
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| 18 | |
Which strategy for punishing cheating has consistently been the winning strategy in tournaments pitting decision strategies against one another? |
| | A) | Nash strategy |
| | B) | eye-for-an-eye |
| | C) | grim |
| | D) | tit-for-tat |
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| 19 | |
Which of the following conditions make it LESS likely that a cartel will succeed? |
| | A) | a small number of cartel members. |
| | B) | similar physical characteristics of goods among cartel members. |
| | C) | similar cost structures among cartel members. |
| | D) | differentiated cost structures among cartel members. |
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| 20 | |
A form of strategic entry deterrence is |
| | A) | limit pricing. |
| | B) | forming a cartel. |
| | C) | maintaining excess capacity. |
| | D) | both a and c |
| | E) | all of the above |
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