113.
Refer to the payoff matrix. Which cell represents the outcome of this game?
A.
A
114.
Refer to the payoff matrix. Which of the following statements is true regarding the outcome of
this game?
A. Both firms will price high, and this outcome is a Nash equilibrium.
115.
Refer to the payoff matrix. Which of the following statements is true regarding the outcome of
this game?
A. Both firms will price high, and this outcome is a prisoner’s dilemma.
14–64
116.
Refer to the payoff matrix. Suppose that Alpha and Beta agree that they will both pursue a
high-price strategy. If Beta then cheats on the agreement in order to increase profits, which
of
the following is true?
D.
The game is a negative-sum game.
117.
Collusive agreements between two firms are most likely to be honored when the game
14–65
A.
is a one–time game with the opportunity for a prisoner’s dilemma.
118.
Zippy’s and Tony’s are rival pizza restaurants in a small town. (Together they form a local
duopoly.) Zippy’s management determines that if it increases its advertising expenditures, it
will increase profits regardless of whether Tony‘s increases its advertising budget. Based on
this information, we can conclude that
A. this is a one–time game.
119.
Larry’s Lizards and Ronaldo’s Reptiles are competing pet store franchises. Both are
considering opening a store in the small town of Turtleville. If Ronaldo’s opens a profitable
store
in Turtleville and Larry’s management determines that it is not profitable to also open a
store, then
A.
this is a simultaneous game.
14–66
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
AACSB: Knowledge Application
Ac c e s s i b i l i ty :
Keyboard Navigation
Blooms: Apply
Di f f i cu l t y :
03 Hard
Learning Objective: 14–06 Utilize additional game-theory terminology and demonstrate
how to find Nash equilibriums in both simultaneous and sequential games.
Test Bank: I
Topic:
Game Theory and Strategic Behavior
120.
In a sequential game, the first mover into a new market
A. always earns a greater payoff than the second mover.
121.
14–67
Refer to the payoff matrix. Bob’s Burgers and Sam‘s Sandwiches are competing restaurants in a
small town. Both are considering adding pizza to their line of products. If this is a
one–time
simultaneous game,
A.
both firms have a dominant strategy to add pizza to their menu.
122.
Refer to the payoff matrix. Bob’s Burgers and Sam‘s Sandwiches are competing restaurants in a
14–68
small town. Both are considering adding pizza to their line of products. If this is a
sequential
game,
D.
there is only one possible Nash equilibrium for this game.
123.
Refer to the payoff matrix. Bob’s Burgers and Sam‘s Sandwiches are competing restaurants in a
small town. Both are considering adding pizza to their line of products. If this is a
sequential
game and Bob’s moves first, which cell represents the final outcome?
14–69
A. A
124.
Refer to the payoff matrix. Bob’s Burgers and Sam‘s Sandwiches are competing restaurants in a
small town. Both are considering adding pizza to their line of products. If this is a
sequential
game but we don’t know who moves first, what can we say about the final outcome?
A.
There is no Nash equilibrium attainable for this game.
14–70
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written consent of McGraw-Hill Education.
D. Cells B and C both represent possible Nash equilibrium outcomes for this game.
125. In a sequential game with two firms, the first mover into a new market
A.
is guaranteed positive economic profits.
126.
Refer to the payoff matrix. Suppose that Speedy Bike and Power Bike are the only two bicycle
manufacturing firms serving the market. Both can choose large or small advertising
budgets. If
this is a one-time, simultaneous game, which cell represents the final outcome we would
expect to occur?
D.
D
127.
Refer to the payoff matrix. Suppose that Speedy Bike and Power Bike are the only two bicycle
manufacturing firms serving the market. Both can choose large or small advertising
budgets. If
this is a repeated game with no cooperation or reciprocity, which cell represents the final
outcome we would expect to occur?
D.
D
128.
Refer to the payoff matrix. Suppose that Speedy Bike and Power Bike are the only two bicycle
manufacturing firms serving the market. Both can choose large or small advertising
budgets. If
this is a repeated game with no cooperation or reciprocity, cell A
D.
is the expected outcome of this game, and it is a Nash equilibrium but not a prisoner’s
dilemma.
129.
Refer to the payoff matrix. Suppose that Speedy Bike and Power Bike are the only two bicycle
manufacturing firms serving the market. Both can choose large or small advertising
budgets.
Is there a Nash equilibrium solution to this game?
A.
There is no possible Nash equilibrium solution.
130.
Refer to the payoff matrix. Suppose that Speedy Bike and Power Bike are the only two bicycle
manufacturing firms serving the market. Both can choose large or small advertising
budgets. If
this is a repeated game and the firms cooperate to maximize profits, which of the following
outcomes would we expect to occur?
A. In repeated playing, the outcomes would alternate between cells A and D.
14–76
131.
Refer to the payoff matrix. Suppose that Speedy Bike and Power Bike are the only two bicycle
manufacturing firms serving the market. Both can choose large or small advertising
budgets. If
this is a repeated game, it is in the long-term best interests of both players to
A.
compete, attempting to maximize their own payoffs each time the game is played.
132.
Which of the following best describes a Nash equilibrium?
A.
An outcome from which one or both competitors can improve their position by adopting an
alternative strategy.
14–77
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written consent of McGraw-Hill Education.
C.
An outcome that is stable only because of credible threats.
D. An outcome that both competitors see as optimal, given the strategy of their rival.
133.
In game theory, the credibility of a threat
A. determines whether or not a Nash equilibrium to a game exists.
134.
The primary advantage of displaying a game in extensive form instead of strategic form is
that extensive form allows one to
D.
determine whether credible threats are possible; strategic form does not.
14–78
135.
Game trees are most useful for
A.
showing Nash equilibrium.
136.
Which of the following terms best defines the choices available to the players of a game?
A.
terminal nodes
137.
14–79
The diagram shows the extensive form version of a strategic game between the two nationally
dominant coffee sellers, Corporate Coffee and Jumbo Java, both of whom are
considering
opening coffee shops in a new town. The payoffs represent, in thousands per month, the profit
(or loss) the firm will realize from its decision. How would the extensive
form figure appear
in strategic form?
A.
Jumbo Java
Enter
Don’t Enter
Enter Corporate Coffee
Jumbo:$0
CC: $0
Jumbo:$0
CC: $0
Don’t enter
Jumbo:$8
CC: $0
Jumbo: –
$3CC: $2
B.
Jumbo Java
Enter
Don’t Enter
Enter Corporate Coffee
Jumbo:$-3
CC: $0
Jumbo:$0
CC: $10
Don’t enter
Jumbo:$8
CC: $0
Jumbo : $0CC:
0
C.
Jumbo Java
Enter
Don’t Enter
Enter Corporate Coffee
Jumbo: -$3
CC: $2
Jumbo:$10
CC: $0
Don’t enter
Jumbo:$0
CC: $10
Jumbo: $0CC
$0
D.
Jumbo Java
Enter
Don’t Enter
Enter Corporate Coffee
Jumbo:$0
CC: $0
Jumbo:$10
CC: $0
Don’t enter
Jumbo:$0
CC: $10
Jumbo: –
$3CC: $2
138.