Exam 9: Games and Strategic Behavior

Suppose that you have noticed that almost all of the car dealers in your city are located along a three-block stretch of the same street. A likely reason for this clustering of car dealers is that:

The table below shows how the payoffs to two political candidates depend on whether the candidates run a positive or negative campaign. The payoffs are given in terms of the percentage change in the number of votes received.   In the Nash equilibrium of this game:

A strategy that limits defection in a repeated prisoner's dilemma game is:

A purely self-interested diner is more likely to tip:

Suppose Acme and Mega produce and sell identical products and face zero marginal and average cost. Below is the market demand curve for their product. Suppose Acme and Mega decide to collude and work together as a monopolist with each firm producing half the quantity demanded by the market at the monopoly price. If Mega cheats on the agreement by reducing its price to $1 and Acme matches the price cut, then if consumers are evenly split between the two firms, Acme's economic profit will be ________.

The market for bagels contains two firms: BagelWorld (BW)and Bagels'R'Us (BRU). The owners of the two firms decide to fix the price of bagels. The table below shows how each firm's profit (in dollars)depends on whether they abide by the agreement or cheat on the agreement.   For Bagel World, ________ is a ________.

Refer to the figure below. Player A can infer that Player B will:

Suppose Jordan and Lee are trying to decide what to do on a Friday. Jordan would prefer to see a comedy while Lee would prefer to see a documentary. One documentary and one comedy are showing at the local cinema. The payoffs they receive from seeing the films either together or separately are shown in the payoff matrix below. Both Jordan and Lee know the information contained in the payoff matrix. They purchase their tickets simultaneously, ignorant of the other's choice.    Which of the following statements is true?

The market for bagels contains two firms: BagelWorld (BW)and Bagels'R'Us (BRU). The owners of the two firms decide to fix the price of bagels. The table below shows how each firm's profit (in dollars)depends on whether they abide by the agreement or cheat on the agreement.   Is this game a prisoner's dilemma?

Suppose Acme and Mega produce and sell identical products and face zero marginal and average cost. Below is the market demand curve for their product. If Acme and Mega decide to collude and work together as a monopolist with each firm producing half the quantity demanded by the market at the monopoly price, then what will be Mega's economic profit?

Miniville is an isolated town located on the southern shore of Lake Condescending, a very large lake. The western edge of Miniville is adjacent to impassable mountains and there are no towns or businesses for many miles to the east. The 300 residents of Miniville are evenly distributed along 3 miles of shoreline on the lake, east of the mountains. Lake Shore Drive, the only street in town, provides access to Miniville's homes and businesses. All residents live between the lake and the street; businesses locate on the other side of the street. Lake Shore Drive is 3 miles long, and the points labeled A, B, and C are 1, 2, and 3 miles from the western end of Lake Shore Drive, respectively. All residents of Miniville shop at the store located closest to their homes. Because all residents of Miniville shop at the store located closest to their homes, the optimal location for the first store to open in Miniville is:

Suppose there are two small island countries: Avarice, which is populated by people who are completely self-interested, and Altruism, which is populated by people who have adopted social norms of generosity and cooperation. Suppose residents of each island often play prisoner's dilemma games, always matched with a person from the same island, but not a person who they know or will play with again. If the same number of games is played on each island, you would expect:

Tracy and Amy are playing a game in which Tracy has the first move at X in the decision tree shown below. Once Tracy has chosen either the top or bottom branch at X, Amy, who can see what Tracy has chosen, must choose the top or bottom branch at Y or Z. Both players know the payoffs at the end of each branch. In the equilibrium this game, Tracy chooses the ________ branch, and then Amy chooses the ________ branch.

Player 1 and Player 2 are playing a game in which Player 1 has the first move at A in the decision tree shown below. Once Player 1 has chosen either Up or Down, Player 2, who can see what Player 1 has chosen, must choose Up or Down at B or C. Both players know the payoffs at the end of each branch. What is the equilibrium outcome of this game?

A prisoner's dilemma illustrates situations in which:

Hotelling's model has been used to describe differentiation in the political "market." Suppose that 100 voters are evenly distributed between the extreme left and the extreme right on the political spectrum, and that all voters vote, and they always vote for the candidate closest to them on this spectrum. The numbers on this spectrum represent the number of voters lying to the left of the number. So, at the midpoint, fifty voters lie to the left and fifty to the right. If Candidate X is running against Candidate Z, by moving to the right Candidate X would:

The table below shows how the payoffs to two political candidates depend on whether the candidates run a positive or negative campaign. The payoffs are given in terms of the percentage change in the number of votes received.   Suppose that the Republican candidate tells the Democratic candidate that he intends to run a positive campaign. The likely result is that:

Player 1 and Player 2 are playing a game in which Player 1 has the first move at A in the decision tree shown below. Once Player 1 has chosen either Up or Down, Player 2, who can see what Player 1 has chosen, must choose Up or Down at B or C. Both players know the payoffs at the end of each branch.  What is the equilibrium outcome of this game?

According to the text, everyone shouts at a party in order to be heard. If instead everyone spoke at a normal volume people would still be heard, but people continue to shout because:

In a repeated prisoner's dilemma, players: