CH 14 FINAL Flashcards
Which of the following is a simultaneous decision game?
A) Tic-tac-toe
B) Chess
C) Poker
D) Rock-paper-scissors
D) Rock-paper-scissors
In a two-player simultaneous game, if player A has a dominant strategy and player B does not,
player B will
A) employ a mixed strategy.
B) choose his best strategy assuming that player A plays her dominant strategy.
C) not achieve a Nash equilibrium.
D) assume that player A does not choose her dominant strategy.
B) choose his best strategy assuming that player A plays her dominant strategy.
A mixed strategy may
A) be part of a Nash equilibrium.
B) be a set of probabilities of selecting each possible action.
C) lead identical firms to choose different actions.
D) All of the above.
D) All of the above.
Collusion is more likely to occur when
A) there is fear of punishment for not colluding.
B) there is a known finite time horizon.
C) there are large gains to be made by cheating on an agreement.
D) the game lasts only one period.
D) the game lasts only one period.
The term prisoners’ dilemma refers to a game in which
A) there are no Nash equilibria.
B) there are no dominant strategies.
C) the payoff from playing the dominant strategy is the same for each player.
D) the payoff from playing the dominant strategy is not the highest payoff possible.
A) there are no Nash equilibria.
A strategy is dominant if
A) it yields a greater payoff than any other player receives.
B) it yields a payoff at least as large as that from any other strategy, regardless of the actions of
other players.
C) the player cannot gain by changing strategy, assuming that no other player changes strategy.
D) it is part of a Nash equilibrium.
B) it yields a payoff at least as large as that from any other strategy, regardless of the actions of
other players.
What is the primary difference between a mixed strategy and a pure strategy?
A) Pure strategies are always dominated strategies.
B) Mixed strategies call for randomizing over possible actions, pure strategies do not.
C) Pure strategies are much more common than mixed strategies.
D) Mixed strategies are not optimal whereas pure strategies are.
B) Mixed strategies call for randomizing over possible actions, pure strategies do not.
One interesting feature of a prisoner’s dilemma game is that
A) non-cooperative behavior leads to lower payoffs than cooperative behavior.
B) it was only valid before the industrial revolution.
C) individuals behave irrationally when they behave non-cooperatively.
D) cooperative behavior leads to lower payoffs than non-cooperative behavior.
A) non-cooperative behavior leads to lower payoffs than cooperative behavior.
If only one firm operates in a market, and a potential entrant is blockaded from entering the
market, then the incumbent firm must
A) have acted to prevent entry.
B) be pricing where price equals marginal cost.
C) be a natural monopoly.
D) be the Stackelberg leader.
C) be a natural monopoly.
In the Stackelberg model, the leader has a first-mover advantage because it
A) has lower costs than the follower.
B) commits to producing a larger quantity.
C) reacts to the follower’s decision.
D) differentiates its output.
B) commits to producing a larger quantity.
If a Cournot duopolist announced that it will double its output,
A) it becomes the leader.
B) the other firm does not view the announcement as credible.
C) the other firm will shut down.
D) the other firm will double output also.
B) the other firm does not view the announcement as credible.
Assume an industry, currently dominated by one firm, experiences a large decline in fixed
costs. This will
A) make entry of other firms more likely.
B) make entry of other firms less likely.
C) serve as higher barrier to entry.
D) induce the incumbent firm to exit the industry.
A) make entry of other firms more likely.
The ability to deter entry requires
A) a credible threat that if entry occurs the firm is willing to produce more than they would
otherwise.
B) a credible threat that if entry occurs the firm will not produce more than they would
otherwise.
C) a good lawyer.
D) a clever accounting department.
A) a credible threat that if entry occurs the firm is willing to produce more than they would
otherwise.
Assume a firm is a monopoly and enjoys $10,000,000 profits per year. The firm lobbies to
have a moratorium passed by Congress on new firms in its market for the next 25 years. If there
is no discount rate, how much would the firm be willing to pay to deter entry?
A) $250 million
B) $25 million
C) $100 million
D) $250 billion
A) $250 million
A subgame perfect Nash equilibrium
A) can be solved by backward induction.
B) is a set of strategies that are a Nash equilibrium in every subgame.
C) is a stronger form of Nash equilibrium.
D) All of the above are correct.
D) All of the above are correct.
