Question 1

-The above figure shows the payoff matrix facing an incumbent firm and a potential entrant. The potential entrant cannot earn a profit if the incumbent

Accepted Answer

A) chooses the Cournot level of output. 
B) chooses the Stackelberg leader level of output. 
C) shuts down. 
D) deters entry. 
A) chooses the Cournot level of output. 
B) chooses the Stackelberg leader level of output. 
C) shuts down. 
D) deters entry.

Question 2

Dynamic and static games have outcomes that

Accepted Answer

A) may be different. 
B) are always different. 
C) are not Nash equilibria. 
D) result from dominant strategies. 
A) may be different. 
B) are always different. 
C) are not Nash equilibria. 
D) result from dominant strategies.

Question 3

-The above figure shows the payoff matrix facing an incumbent firm and a potential entrant. Assuming a fixed cost of entry, the outcome will be that the incumbent

Accepted Answer

A) deters entry. 
B) chooses the Stackelberg leader level of output but the potential entrant does not enter anyway. 
C) chooses the Stackelberg leader level of output and the potential entrant enters. 
D) deters entry and earns zero profit. 
A) deters entry. 
B) chooses the Stackelberg leader level of output but the potential entrant does not enter anyway. 
C) chooses the Stackelberg leader level of output and the potential entrant enters. 
D) deters entry and earns zero profit.

Question 4

If firms execute a strategy that triggers a permanent punishment, the result in an indefinitely repeated game is

Accepted Answer

A) undefined. 
B) the non-cooperative Nash equilibrium. 
C) the collusive Nash equilibrium. 
D) economically inefficient. 
A) undefined. 
B) the non-cooperative Nash equilibrium. 
C) the collusive Nash equilibrium. 
D) economically inefficient.

Question 5

A sub-game perfect Nash equilibrium is defined as

Accepted Answer

A) a set of strategies that are a Nash equilibrium in every subgame of a static game. 
B) a set of strategies that are a Nash equilibrium in every subgame of a dynamic game. 
C) a set of strategies that are a Nash equilibrium in a single subgame of a dynamic game. 
D) the game within the game. 
A) a set of strategies that are a Nash equilibrium in every subgame of a static game. 
B) a set of strategies that are a Nash equilibrium in every subgame of a dynamic game. 
C) a set of strategies that are a Nash equilibrium in a single subgame of a dynamic game. 
D) the game within the game.

Question 6

An exclusion contract

Accepted Answer

A) is a form of entry deferral. 
B) gives a firm the right to be the exclusive provider of a good in a particular market. 
C) may not always be profitable for the incumbent. 
D) All of the above. 
A) is a form of entry deferral. 
B) gives a firm the right to be the exclusive provider of a good in a particular market. 
C) may not always be profitable for the incumbent. 
D) All of the above.

Question 7

When a prisoners' dilemma game is repeated a finite number of times (T),

Accepted Answer

A) cooperation unravels during the first round of the game, resulting in the static game Nash equilibrium. 
B) cooperation continues until the T-2 round, where the players will switch to a non-cooperative Nash equilibrium. 
C) firms cooperate and achieve the collusive Nash equilibrium for all rounds. 
D) None of the above. 
A) cooperation unravels during the first round of the game, resulting in the static game Nash equilibrium. 
B) cooperation continues until the T-2 round, where the players will switch to a non-cooperative Nash equilibrium. 
C) firms cooperate and achieve the collusive Nash equilibrium for all rounds. 
D) None of the above.

Question 8

Behavioral game theory assumes

Accepted Answer

A) people act rationally. 
B) people have limited calculation capability or psychological biases that cause them to act irrationally. 
C) that people behave differently when playing games than when "playing for real." 
D) people overcome their psychological biases. 
A) people act rationally. 
B) people have limited calculation capability or psychological biases that cause them to act irrationally. 
C) that people behave differently when playing games than when "playing for real." 
D) people overcome their psychological biases.

Question 9

In a Stackelberg game, a monopolist could deter entry from a potential rival by

Accepted Answer

A) telling the potential rival not to enter. 
B) strategically moving first. 
C) moving to a Bertrand model. 
D) None of the above. 
A) telling the potential rival not to enter. 
B) strategically moving first. 
C) moving to a Bertrand model. 
D) None of the above.

Question 10

Assume a firm is a monopoly and enjoys $10 million in 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 any firm(s)arguing against the moratorium be willing to spend to block it?

Accepted Answer

A) something less than $250 million 
B) $250 million 
C) $251 million 
D) $250 billion 
A) something less than $250 million 
B) $250 million 
C) $251 million 
D) $250 billion

Question 11

In a repeated game, deterring entry

Accepted Answer

A) is not possible. 
B) is not a rational strategy if money is lost fighting the first potential entrant. 
C) may require losing money fighting the first potential entrant. 
D) cannot form a subgame perfect Nash equilibrium. 
A) is not possible. 
B) is not a rational strategy if money is lost fighting the first potential entrant. 
C) may require losing money fighting the first potential entrant. 
D) cannot form a subgame perfect Nash equilibrium.

Question 12

Implicit collusion, where players do NOT have an explicit agreement,

Accepted Answer

A) is strictly prohibited under antitrust laws. 
B) is not strictly prohibited under antitrust laws. 
C) results in cheating. 
D) maximizes total surplus in the market. 
A) is strictly prohibited under antitrust laws. 
B) is not strictly prohibited under antitrust laws. 
C) results in cheating. 
D) maximizes total surplus in the market.

Question 13

In a dynamic game, rational players

Accepted Answer

A) will reject outcomes that are not subgame perfect. 
B) use backward induction to determine best responses. 
C) have strategies that select a Nash equilibrium in the game as a whole. 
D) All of the above. 
A) will reject outcomes that are not subgame perfect. 
B) use backward induction to determine best responses. 
C) have strategies that select a Nash equilibrium in the game as a whole. 
D) All of the above.

Question 14

An incumbent's threat to use limit pricing if a firm enters the market

Accepted Answer

A) is credible if the firms have identical costs and market demand supports both firms. 
B) is credible if the firms have different costs and market demand won't support both firms. 
C) is not credible if the firms have different costs and market demand won't support both firms. 
D) is cheap talk, because the other firm will enter, and the incumbent will still be able to charge monopoly pricing. 
A) is credible if the firms have identical costs and market demand supports both firms. 
B) is credible if the firms have different costs and market demand won't support both firms. 
C) is not credible if the firms have different costs and market demand won't support both firms. 
D) is cheap talk, because the other firm will enter, and the incumbent will still be able to charge monopoly pricing.

Question 15

-The above figure shows the payoff to two gasoline stations, A and B, deciding to operate in an isolated town. If firm A chooses its strategy first, then

Accepted Answer

A) firm A will not enter. 
B) firm B's entry is blockaded. 
C) both firms will enter. 
D) firm A will enter and firm B will not. 
A) firm A will not enter. 
B) firm B's entry is blockaded. 
C) both firms will enter. 
D) firm A will enter and firm B will not.

Question 16

A disadvantage of moving too quickly is that

Accepted Answer

A) costs of entry are higher. 
B) consumers aren't loyal. 
C) firms are subject to holdup problems. 
D) All of the above. 
A) costs of entry are higher. 
B) consumers aren't loyal. 
C) firms are subject to holdup problems. 
D) All of the above.

Question 17

In a beauty contest game such as predicting the average of respondents choosing a number between 0 and 100

Accepted Answer

A) the outcome is not normally the Nash equilibrium for the game. 
B) the winner usually exhibits level-3 reasoning. 
C) the winner must understand the non-rationality of the players. 
D) All of the above. 
A) the outcome is not normally the Nash equilibrium for the game. 
B) the winner usually exhibits level-3 reasoning. 
C) the winner must understand the non-rationality of the players. 
D) All of the above.

Question 18

An incumbent monopolist producing more output than necessary might be able to keep potential rivals from entering

Accepted Answer

A) by flooding the market with products below its marginal cost in the short run. 
B) if learning by doing reduces marginal cost. 
C) if the long-run marginal cost can be lowered below the potential entrant's short-run marginal cost. 
D) All of the above. 
A) by flooding the market with products below its marginal cost in the short run. 
B) if learning by doing reduces marginal cost. 
C) if the long-run marginal cost can be lowered below the potential entrant's short-run marginal cost. 
D) All of the above.

Question 19

In an indefinitely repeated game, a firm might use a ________ to ________ a rival that defects from a cooperative strategy.

Accepted Answer

A) trigger strategy; threaten 
B) trigger strategy; punish 
C) legal maneuver; sue 
D) tacit threat; dissuade 
A) trigger strategy; threaten 
B) trigger strategy; punish 
C) legal maneuver; sue 
D) tacit threat; dissuade

Question 20

Which of the following is a sequential game?

Accepted Answer

A) Rock-paper-scissors (Roshambo) 
B) Paintball 
C) Monopoly 
D) Boxing 
A) Rock-paper-scissors (Roshambo) 
B) Paintball 
C) Monopoly 
D) Boxing

-The above figure shows the payoff matrix facing an incumbent firm and a potential entrant. The potential entrant cannot earn a profit if the incumbent

Dynamic and static games have outcomes that

-The above figure shows the payoff matrix facing an incumbent firm and a potential entrant. Assuming a fixed cost of entry, the outcome will be that the incumbent

If firms execute a strategy that triggers a permanent punishment, the result in an indefinitely repeated game is

A sub-game perfect Nash equilibrium is defined as

An exclusion contract

When a prisoners' dilemma game is repeated a finite number of times (T),

Behavioral game theory assumes

In a Stackelberg game, a monopolist could deter entry from a potential rival by

Assume a firm is a monopoly and enjoys $10 million in 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 any firm(s)arguing against the moratorium be willing to spend to block it?

In a repeated game, deterring entry

Implicit collusion, where players do NOT have an explicit agreement,

In a dynamic game, rational players

An incumbent's threat to use limit pricing if a firm enters the market

-The above figure shows the payoff to two gasoline stations, A and B, deciding to operate in an isolated town. If firm A chooses its strategy first, then

A disadvantage of moving too quickly is that

In a beauty contest game such as predicting the average of respondents choosing a number between 0 and 100

An incumbent monopolist producing more output than necessary might be able to keep potential rivals from entering

In an indefinitely repeated game, a firm might use a to a rival that defects from a cooperative strategy.

Which of the following is a sequential game?

Introduction

Supply and Demand

Empirical Methods for Demand Analysis

Consumer Choice

Production

Costs

Firm Organization and Market Structure

Competitive Firms and Markets

Monopoly

Pricing With Market Power

Oligopoly and Monopolistic Competition

Game Theory and Business Strategy

Managerial Decision-Making Under Uncertainty

Asymmetric Information

Government and Business

Global Business

Filters

Exam 13: Strategies Over Time

-The above figure shows the payoff matrix facing an incumbent firm and a potential entrant. The potential entrant cannot earn a profit if the incumbent

Dynamic and static games have outcomes that

-The above figure shows the payoff matrix facing an incumbent firm and a potential entrant. Assuming a fixed cost of entry, the outcome will be that the incumbent

If firms execute a strategy that triggers a permanent punishment, the result in an indefinitely repeated game is

A sub-game perfect Nash equilibrium is defined as

An exclusion contract

When a prisoners' dilemma game is repeated a finite number of times (T),

Behavioral game theory assumes

In a Stackelberg game, a monopolist could deter entry from a potential rival by

Assume a firm is a monopoly and enjoys $10 million in 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 any firm(s)arguing against the moratorium be willing to spend to block it?

In a repeated game, deterring entry

Implicit collusion, where players do NOT have an explicit agreement,

In a dynamic game, rational players

An incumbent's threat to use limit pricing if a firm enters the market

-The above figure shows the payoff to two gasoline stations, A and B, deciding to operate in an isolated town. If firm A chooses its strategy first, then

A disadvantage of moving too quickly is that

In a beauty contest game such as predicting the average of respondents choosing a number between 0 and 100

An incumbent monopolist producing more output than necessary might be able to keep potential rivals from entering

In an indefinitely repeated game, a firm might use a ________ to ________ a rival that defects from a cooperative strategy.

Which of the following is a sequential game?

Introduction

Supply and Demand

Empirical Methods for Demand Analysis

Consumer Choice

Production

Costs

Firm Organization and Market Structure

Competitive Firms and Markets

Monopoly

Pricing With Market Power

Oligopoly and Monopolistic Competition

Game Theory and Business Strategy

Managerial Decision-Making Under Uncertainty

Asymmetric Information

Government and Business

Global Business

Filters

In an indefinitely repeated game, a firm might use a to a rival that defects from a cooperative strategy.