Module 1 - Strategic Games Practice Flashcards
If China chooses to MITIGATE, then USA’s best response is to ____
a) Choose NO ACTION
b) Always choose MITIGATE as it is a dominant strategy
c) Also choose to MITIGATE
d) Always choose NO ACTION as it is a dominant strategy
B. Always choose MITIGATE as it is a dominant strategy
Regardless of what China does, the USA always has a higher payoff (20 vs 5, or 30 vs 10) playing MITIGATE.
If the USA chooses to MITIGATE emissions, then China’s best response is to ___
a) Also choose to MITIGATE
b) Always choose NO ACTION as it is a dominant strategy
c) Always choose MITIGATE as it is a dominant strategy
d) Choose NO ACTION
C. choose MITIGATE as it is a dominant strategy
Regardless of what USA does, China always has a higher payoff (20 vs 5, or 30 vs 10) playing MITIGATE
The Nash Equilibrium strategies are___
a) [MITIGATE, MITIGATE]
b) [MITIGATE, NO ACTION] [NO ACTION, MITIGATE]
c) [MITIGATE, NO ACTION]
d) [NO ACTION, NO ACTION]
A. Both choose MITIGATE. So the NE is [MITIGATE, MITIGATE]
Each uses their dominant strategy and so the outcome is both mitigate. Note that the
payoffs are symmetric so each plays the same strategy.
You can show that any other pairs of outcomes will always have one of the players regretting their choice. Hence, the other outcomes are not Nash Equilibria since at least one player would unilaterally deviate. Only in [MITIGATE, MITIGATE] is no player wishing to take a different choice, given what the other is doing.
The Nash Equilibrium payoffs are___
a) USA gets 20 and China gets 20
b) USA gets 30 and China gets 5 or USA gets 5 and China gets 30
c) USA gets 20 and China gets 30
d) USA gets 10 and China gets 10
A. USA gets 20 and China gets 20.
This comes from the payoff matrix directly. The other payoffs are from non-NE outcomes.
The Nash Equilibrium is an example of ___
a) A Coordination game
b) Multiple equilibria
c) A Game of Chicken
d) A Prisoner’s Dilemma
A. A Coordination game
The NE has an outcome that is efficient, so is not a Prisoner’s Dilemma. Nor is it a Game of Chicken since that game has multiple equilibria. This game has a unique equilibrium.
Which of the pairs of strategies lead to inefficient outcomes?
a) Only [MITIGATE, MITIGATE] is efficient
b) They are all efficient
c) Only [NO ACTION, NO ACTION] is efficient
d) Only [NO ACTION, NO ACTION] is inefficient
C. Only [NO ACTION, NO ACTION] is inefficient
A Pareto Improvement means we can raise the welfare of one agent without reducing the welfare of any other agent. So we check each payoff pair and ask whether there is a Pareto Improvement. If not, then it is efficient. Only with [NO ACTION, NO ACTION] is there a Pareto Improvement hence it is inefficient.
The strategic game between the USA and China is an example of ___
a) A non-cooperative game
b) A conflict game
c) A constant-sum game
d) A sequential game
A. A non-cooperative game
The game does not have the same sum of payoffs in each ‘box’ so is not constant sum (eg the sum of payoffs are 40, 35, or 20). The equilibrium is unique so not a Conflict game. By assumption, unless stated otherwise, these are simultaneous games not sequential. If you are told that one player can go first, then it becomes a sequential game.
If the two are allowed to communicate their plans and can commit to cooperation, they _______
a) Will gain from the cooperation
b) will choose to misrepresent their plans
c) Do not do any better than if they cannot commit to cooperation
d) will cheat on any agreement
C. Do not do any better than if they cannot commit to cooperation
The NE has payoffs of (20,20). If they cooperate, they will choose [MITIGATE, MITIGATE] since this yields the highest payoffs.
They will not agree to the [MITIGATE, NO ACTION] as this makes the USA worse off. Similar for [NO ACTION , MITIGATE] for China.
In these games, misrepresenting your plans is not a good strategy as the other player can figure out what you will really do. Though cheating is possible, neither will since each is following their dominant strategy
If the USA is allowed to commit to NO ACTION first, then China _______
a) will choose NO ACTION as well
b) Will choose to ignore what the USA does
c) Will try to force the USA to MITIGATE
d) Will choose to MITIGATE
D. Will choose to MITIGATE
They both have a dominant strategy to MITIGATE, so going first conveys no strategic advantage to the USA as they cannot ‘manipulate’ China in a way that benefits the USA.
If the USA is allowed to choose their policy first, then _______
a) The USA will choose NO ACTION, knowing China will follow with NO ACTION
b) The USA will choose MITIGATE, knowing China will follow with MITIGATE
c) The USA will choose NO ACTION, knowing China will choose MITIGATE
d) The USA will choose MITIGATE, knowing China will choose NO ACTION
B. The USA will choose MITIGATE, knowing China will follow with MITIGATE
This follows from the dominant strategy. If there were not a dominant strategy, then going first could lead to a different equilibrium. Just not with these payoffs.
Game theory:
A. Analyzes strategic interaction among rivals.
B. Examines pricing behavior of firms in perfectly-competitiveindustries.
C. Examines output decisions of rival firms in all industries.
D. Is only useful for examining moves and counter-moves of players in sequential-move games.
E. None of the above.
A. Analyzes strategic interaction among rivals.
A two-player, simultaneous-move games is one in which the players move:
A. At the same time.
B. At different times, without knowledge of the other player’s move.
C. At different times, but are aware of the other player’s move.
D. Sequentially.
E. All of the above.
A. At the same time.
An example of a simultaneous-move game is:
A. Chess.
B. Checkers.
C. Rock-scissors-paper.
D. Mah Jongg.
E. Stratego.
C. Rock-scissors-paper.
In game theory, a strategy:
A. Is made up of a series of countermoves.
B. Is a decision rule that identifies a player’s moves.
C. Constitutes a multi-stage game.
D. Must be strictly dominant.
E. Must have a Nash equilibrium.
B. Is a decision rule that identifies a player’s moves.
A Nash equilibrium:
A. Results in a payoff for a player that is no lower than any other payoff, regardless of the strategy adopted by the other players.
B. Results in the largest payoff for both players.
C. Occurs when each player adopts a strategy that it believes is the best response to the other player’s strategy.
D. Results in the best of the worst possible payoffs.
C. Occurs when each player adopts a strategy that it believes is the best response to the other player’s strategy.
In the matrix, larger payoffs are preferred. Which player has a strictly-dominant strategy?
A. Player A
B. Player B
C. Both players
D. Neither player
C. Both players
In the matrix, larger payoffs are preferred. A Nash equilibrium occurs at the strategy profile:
A. {A1,B1}.
B. {A1,B2}.
C. {A2,B1}.
D. {A2,B2}.
A. {A1,B1}.
If both players adopt a maximin strategy, then the strategy profile for this game is:
A. {A1,B1}.
B. {A1,B2}.
C. {A2,B1}.
D. {A2,B2}.
D. {A2,B2}.
Which firm has a strictly-dominant strategy?
A. Firm A
B. Firm B
C. Both firms
D. Neither firm
C. Both firms
A Nash equilibrium occursat the strategy profile:
A. {Raise Price, Raise Price}.
B. {Raise Price, Lower Price}.
C. {Lower Price, Raise Price}.
D. {Lower Price, Lower Price}.
D. {Lower Price,Lower Price}.
Assume that this is a simultaneous-move, cooperative, one-shot game. The strategy profile for this game is:
A. {Raise Price, Raise Price}.
B. {Raise Price, Lower Price}.
C. {Lower Price, Raise Price}.
D. {Lower Price, Lower Price}.
A. {Raise Price,Raise Price}.
Assume that this is a simultaneous-move, cooperative, infinitely-repeated game. The strategy profile for this game is:
A. {Raise Price, Raise Price}.
B. {Raise Price, Lower Price}.
C. {Lower Price, Raise Price}.
D. {Lower Price, Lower Price}.
D. {Lower Price,Lower Price}.
What is the Nash equilibrium for this game?
A. {Television, Radio}
B. {Television, Magazines}
C. {Newspapers, Radio}
D. {Newspapers, Magazines}
D. {Newspapers, Magazines}
Which firm has a strictly dominant strategy?
A. Snake
B. Loblolly
C. Snake and Loblolly
D. Neither Snake nor Loblolly
B. Loblolly
The solution profile for this game is:
A. {Television, Radio}
B. {Television, Magazines}
C. {Newspapers, Radio}
D. {Newspapers, Magazines}
D. {Newspapers, Magazines}
The Snake River Company has a:
A. Weakly-Dominant Strategy
B. Non-Strictly-Dominant Strategy
C. Strictly-Dominated Strategy
D. Iterated-Weakly-Dominant Strategy
A. Weakly-Dominant Strategy
