Question 1

The figure shown represents the choices and payoffs (company profits) of two music shops-MiiTunes and The Rock Shop. MiiTunes is an established business in the area deciding whether to charge its usual high prices or to charge very low prices, in the hopes that a new business will not be able to compete at these prices. The Rock Shop is trying to decide whether or not it should enter the market.According to the figure, if MiiTunes charges low prices, The Rock Shop:

Accepted Answer

A)  will enter the market and will earn $4 million.
B)  will enter the market and will lose $2 million.
C)  will not enter the market and will earn $0.
D)  There is not enough information to determine what The Rock Shop will do.E) None of the above
F) A) and B)

Question 2

In a commitment strategy, players agree to:

Accepted Answer

A)  submit to a penalty in the future if they defect from a given strategy.
B)  cooperate before the game begins.
C)  cooperate in repeated games until someone defects.
D)  None of these describe a commitment strategy.E) A) and B)
F) B) and D)

Question 3

The figure shown represents the choices and payoffs (company profits) of two music shops-MiiTunes and The Rock Shop. MiiTunes is an established business in the area deciding whether to charge its usual high prices or to charge very low prices, in the hopes that a new business will not be able to compete with these prices. The Rock Shop is trying to decide whether or not it should enter the market.If MiiTunes and The Rock Shop are faced with the choices in the figure shown, what outcome can we predict?

Accepted Answer

A)  MiiTunes will charge low prices and The Rock Shop will enter the market.
B)  MiiTunes will charge high prices and The Rock Shop will enter the market
C)  MiiTunes will charge high prices and The Rock Shop will not enter the market.
D)  MiiTunes will charge low prices and The Rock Shop will enter the market..E) B) and C)
F) C) and D)

Question 4

The process of analyzing a problem in reverse-starting with the last choice, then moving to the second-to-last choice, and so on to determine the optimal strategy-is called:

Accepted Answer

A)  backward induction.
B)  reverse collusion.
C)  dominant strategizing.
D)  credible deterrence.E) C) and D)
F) B) and C)

Question 5

Which of the following is an example of a payoff in a game?

Accepted Answer

A)  A salary
B)  Winning an election
C)  Having clean drinking water
D)  All of these are examples of payoffs.E) B) and C)
F) C) and D)

Question 6

A company that wants to subtly reassure its competitors that it is committed to a tit-for-tat strategy might:

Accepted Answer

A)  set its prices below cost.
B)  offer price-matching guarantees.
C)  attempt to collude.
D)  offer a commitment strategy.E) A) and C)
F) B) and C)

Question 7

The famous historical example of Cortés burning his boats when fighting the Aztecs is an example of:

Accepted Answer

A)  a commitment device.
B)  tit-for-tit strategy.
C)  the first-mover advantage.
D)  a prisoners' dilemma.E) A) and D)
F) A) and B)

Question 8

The figure shown represents the payoffs involved when Sarah and Joe work on a school project together for a single grade. They both will enjoy a higher grade when more effort is put into the project, but they also get pleasure from goofing off and not working on the project. The payoffs can be thought of as the utility each would get from the effort they individually put forth and the grade they jointly receive.If Joe and Sarah act in their own self-interest, what utility will Sarah receive?

Accepted Answer

A)  6
B)  10
C)  7
D)  15E) A) and D)
F) A) and C)

Question 9

Economic games can be used to analyze decisions regarding which of the following areas of concern?

Accepted Answer

A)  War
B)  Business
C)  Environmental protection
D)  All of these can be analyzed using economic games.E) None of the above
F) All of the above

Question 10

A decision tree helps a player identify:

Accepted Answer

A)  optimal strategy in a simultaneous game.
B)  dominant strategies in a prisoners' dilemma-type game.
C)  optimal strategy in a sequential game.
D)  and define a binding commitment strategy.E) A) and B)
F) A) and C)

Question 11

Two players who are both playing tit-for-tat can quickly find their way toward:

Accepted Answer

A)  lasting cooperation.
B)  noncooperative outcomes for the remaining rounds.
C)  a cycle of cooperation and noncooperation, similar to a business cycle.
D)  None of these statements are true.E) All of the above
F) None of the above

Question 12

Repeated play can change the outcome in sequential games by:

Accepted Answer

A)  reducing the first-mover advantage.
B)  removing the incentive to cooperate.
C)  making collusion more probable.
D)  increasing the incentive to defect.E) B) and C)
F) C) and D)

Question 13

The figure shown represents a simultaneous-move game between two classmates working on a project together. Each person must decide whether to work hard on the project or to slack off.  Which of the following statements is true?

Accepted Answer

A)  Neither player has a dominant strategy.
B)  This game is a prisoners' dilemma.
C)  Only one player has a dominant strategy.
D)  The Nash Equilibrium in this game is for both Tia and Emma to work hard.E) None of the above
F) A) and C)

Question 14

In the real world, wage negotiations may avoid numerous rounds of offers and counteroffers:

Accepted Answer

A)  because the company can simply offer the split that would eventually occur if the two sides played all the rounds.
B)  because neither a company nor employees can afford to not work for that long.
C)  unless the employees play an ultimatum game using a union to negotiate.
D)  None of these statements are true.E) B) and C)
F) A) and D)

Question 15

A Nash equilibrium:

Accepted Answer

A)  is reached when all players choose the best strategy they can, given the choices of all other players.
B)  occurs when no player has an incentive to change strategy, given other players' decisions.
C)  is considered to be a stable outcome of a game.
D)  All of these statements are true.E) A) and B)
F) A) and C)

Exam 9: Game Theory and Strategic Thinking

In a commitment strategy, players agree to:

Correct Answer
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A Nash equilibrium:

Correct Answer
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Correct Answer
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Two players who are both playing tit-for-tat can quickly find their way toward:

Correct Answer
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A decision tree helps a player identify:

Correct Answer
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Economic games can be used to analyze decisions regarding which of the following areas of concern?

Correct Answer
verified

A company that wants to subtly reassure its competitors that it is committed to a tit-for-tat strategy might:

Correct Answer
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Repeated play can change the outcome in sequential games by:

Correct Answer
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The process of analyzing a problem in reverse-starting with the last choice, then moving to the second-to-last choice, and so on to determine the optimal strategy-is called:

Correct Answer
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The famous historical example of Cortés burning his boats when fighting the Aztecs is an example of:

Correct Answer
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The figure shown represents a simultaneous-move game between two classmates working on a project together. Each person must decide whether to work hard on the project or to slack off. Which of the following statements is true?

Correct Answer
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Correct Answer
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Correct Answer
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Which of the following is an example of a payoff in a game?

Correct Answer
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In the real world, wage negotiations may avoid numerous rounds of offers and counteroffers:

Correct Answer
verified

Exam 9: Game Theory and Strategic Thinking

In a commitment strategy, players agree to:

Correct AnswerverifiedShow Answer

A Nash equilibrium:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Two players who are both playing tit-for-tat can quickly find their way toward:

Correct AnswerverifiedShow Answer

A decision tree helps a player identify:

Correct AnswerverifiedShow Answer

Economic games can be used to analyze decisions regarding which of the following areas of concern?

Correct AnswerverifiedShow Answer

A company that wants to subtly reassure its competitors that it is committed to a tit-for-tat strategy might:

Correct AnswerverifiedShow Answer

Repeated play can change the outcome in sequential games by:

Correct AnswerverifiedShow Answer

The process of analyzing a problem in reverse-starting with the last choice, then moving to the second-to-last choice, and so on to determine the optimal strategy-is called:

Correct AnswerverifiedShow Answer

The famous historical example of Cortés burning his boats when fighting the Aztecs is an example of:

Correct AnswerverifiedShow Answer

The figure shown represents a simultaneous-move game between two classmates working on a project together. Each person must decide whether to work hard on the project or to slack off. Which of the following statements is true?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is an example of a payoff in a game?

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In the real world, wage negotiations may avoid numerous rounds of offers and counteroffers:

Correct AnswerverifiedShow Answer

Correct Answer
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