Exam 9: Games and Strategic Behavior

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 while Acme continues to comply with the collusive agreement, then Mega will then sell ________ units and Acme will sell ________ units.

The payoff matrix below shows the payoffs (in millions of dollars)for two firms, A and B, for two different strategies, investing in new capital or not investing in new capital.   An industry spy comes to firm B and offers to pay B in exchange for B's certain and enforceable promise to not invest. How much must the spy pay B?

Suppose Firm A and Firm B are considering whether to invest in a new production technology. For each firm, the payoff to investing (given in thousands of dollars per day)depends upon whether the other firm invests, as shown in the payoff matrix below.     What is the Nash equilibrium of this game?

Quick Buck and Pushy Sales produce and sell identical products and face zero marginal and average cost. Below is the market demand curve for their product. If Quick Buck and Pushy Sales decide to collude and work together as a monopolist, then together they should produce ________ units per month and charge ________ per unit.

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.    Suppose a timing element is added to the game, and that Jordan buys a ticket first. Then, after seeing Jordon's choice, Lee buys a ticket. What will be the equilibrium outcome?

Psychological incentives:

A payoff matrix shows:

Commitment devices are necessary when:

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?

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. If before Tracy chose, Amy could make a credible commitment to choose either the top or bottom branch when her turn came, then Amy would commit to the ________ branch and Tracy would choose the ________ branch.

The payoff matrix below shows the payoffs (in millions of dollars)for two firms, A and B, for two different strategies, investing in new capital or not investing in new capital.   This game is an example of a:

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 while Acme continues to comply with the collusive agreement, then Mega's economic profit will be ________.

Consider the accompanying payoff matrix. If Column Cruises offers reduced rates, and Row Resorts keeps its rates high, then Row Resorts will earn ________, and Column Cruises will earn ________.

Suppose Firm A and Firm B are considering whether to invest in a new production technology. For each firm, the payoff to investing (given in thousands of dollars per day)depends upon whether the other firm invests, as shown in the payoff matrix below. Which of the following statements is correct?

A commitment problem exists when people cannot achieve their goals because:

Suppose Firm A and Firm B are considering whether to invest in a new production technology. For each firm, the payoff to investing (given in thousands of dollars per day)depends upon whether the other firm invests, as shown in the payoff matrix below.   Is this game a prisoner's dilemma?

The payoff matrix below shows the payoffs (in millions of dollars)for two firms, A and B, for two different strategies, investing in new capital or not investing in new capital. Firm A's dominant strategy is to ________, and Firm B's dominant strategy is to ________.

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.     This game:

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. Commitment problems will be:

Game theory provides tools that are used to model: