Chapter 10

Question 1

Marra’s Definition of Nash

Answer 1

each player is doing the best they can do given what the other player is doing

Question 2

Value To Cooperation Formula

Answer 2

        i

Question 3

Value To Cheating

Answer 3

Profit(Cheating)- Profit(Cooperation)

Question 4

In what condition does cheating make sense

Answer 4

profit(cheating)-profit(cooperation)> profit(cooperation)-profit(nash)/i

Question 5

Interest Formula

Answer 5

profit(cheat)-profit(cooperation

Question 6

Explain the relationship between profit and interest

Answer 6

…….notes

Question 7

Nash equilibrium

Answer 7

A condition
describing a set of
strategies in which
no player can
improve her
payoff by
unilaterally
changing her own
strategy, given the
other players’
strategies.

Question 8

Principle: Put Yourself in Your Rival’s Shoes

Answer 8

If you do not have a dominant strategy, look at the game from your rival’s perspective. If
your rival has a dominant strategy, anticipate that he or she will play

Question 9

Principle: Play Your Dominant Strategy

Answer 9

Check to see if you have a dominant strategy. If you have one, play it.

Question 10

dominant

strategy

Answer 10

A strategy that
results in the
highest payoff to a
player regardless
of the opponent’s
action.

Question 11

simultaneous move

game

Answer 11

Game in which
each player makes
decisions without
knowledge of the
other players’
decisions.

Question 12

Example of Sequential Move Games

Answer 12

• tic tac toe
• chess
• checkers

Question 13

Examples of Simultaneous Move Games

Answer 13

• rock, paper, and scissors

- dueling

Question 14

Value Formula: Cooperation

Answer 14

             i

Question 15

Value Formula: Cheating

Answer 15

Profit Cheat - Profit Cooperation

Question 16

Rational For Cheating Equation

Answer 16

Profit Cheat - Profit Cooperation ————> Profit Cooperation - Profit Nash /i

Question 17

Interest Formula

Answer 17

Profit Cheat- Profit Cooperation

Question 18

when the interest

rate is low, firms may find it in their interest to

Answer 18

collude and charge high prices,

unlike in the case of a one-shot game.

Question 19

How is finitely repeated unknown similar to infinitely repeated?

Answer 19

the analysis of each is the same

Question 20

Finite Games Unknown Formula

Answer 20

Profit cheat= (profit cooperation )/θ

Question 21

Finite Known: If Finite is know how will game be played

Answer 21

from Nash equilibrium

Question 22

Collusive Points

Answer 22

• number of firms(preferably small)
• detection of cheating
• cost of retaliation
• credible threat
• predictable demand conditions

Question 23

Elaborate on the Factors That Affect Collusion

Answer 23

• number of firms(preferably small)
• detection of cheating
• cost of retaliation
• credible threat
• predictable demand conditions

Question 24

Factors That Affect Collusion

Answer 24

• number of firms(preferably small)
• detection of cheating
• cost of retaliation
• credible threat
• predictable demand conditions

Question 25

What is the best decision in simultaneous one-shot move games?

Answer 25

chose the dominant strategy

Question 26

The Mindset of A One-Shot Game

Answer 26

any gains must be had today or not at all

Question 27

The Mind Set of Infinitely Repeated

Answer 27

-firms must weigh the benefits of current actions versus against the future costs of those actions

Question 28

Why don’t firms usually collude in finite?

Answer 28

because they know the game is eventually coming to an end

Question 29

trigger strategy

Answer 29

A strategy that is
contingent on the
past play of a
game and in
which some
particular past
action “triggers” a
different action by
a player.

Question 30

Hotelling’s law

Answer 30

predicts that a street with two shops will also find both shops right next to each other at the same halfway point. Each shop will serve half the market; one will draw customers from the north, the other all customers from the south.

Question 31

sequential-move

game

Answer 31

Game in which
one player makes
a move after
observing the
other player’s
move.