Multiple Choice Questions
1. The prisoners' dilemma is an example of
a. A sequential game.
b. A simultaneous game.
c. A shirking game.
d. A dating game

2. Nash equilibrium
a. Is where one player maximizes his payoff and the other doesn't.
b. is where each player maximizes his own payoff given the action of the other player.
c. Is where both players are maximizing their total payoff.
d. Is a unique prediction of the likely outcome of a game.

Use the following to answer Questions 3-5:
Consider the following information for a simultaneous move game: Two discount stores (megastore and superstore) are interested in expanding their market share through advertising. The table below depicts the strategic outcomes (profits) of both stores with and without advertising. Payoffs for Megastore are in blue.

3. The Nash equilibrium for both stores is
a. For Megastore to advertise and for Superstore to advertise.
b. For Megastore to advertise and for Superstore not to advertise.
c. For Megastore not to advertise and for Superstore to advertise.
d. For Megastore not to advertise and for Superstore not to advertise.

4. When the game does reach the Nash Equilibrium, the payoffs for both stores will be
a. Megastore $95 and Superstore $80.
b. Megastore $305 and Superstore $55.
c. Megastore $65 and Superstore $285.
d. Megastore $165 and Superstore $115.

5. If collusion were not illegal, then it would be more optimal
a. For Megastore to advertise and for Superstore to advertise.
b. For Megastore to advertise and for Superstore not to advertise.
c. For Megastore not to advertise and for Superstore to advertise.
d. For Megastore not to advertise and for Superstore not to advertise.

6. Prisoners€™ dilemmas show that
a. rational choices can lead to bad outcomes.
b. rational choices can lead to good outcomes.
c. there are no ways to learn where the pitfalls lie.
d. None of the above

7. In repeated games, all of the below make it easier to get out of bad situations except
a. be nice, no first strikes.
b. respond immediately to rivals.
c. punish competitors as much as you can when they don€™t cooperate.
d. make sure your competitors can easily interpret your actions.

Refer to the following strategic form game of price competition for Questions 8 and 9.

8. If this game is played once, then
a. firm A will charge a low price, and firm B will charge a low price.
b. firm A will charge a high price, and firm B will charge a low price.
c. firm A will charge a low price, and firm B will charge a high price.
d. firm A will charge a high price, and firm B will charge a high price.

9. Suppose the game is infinitely repeated. What strategies will each firm likely utilize?
a. Firm A will charge a low price, and firm B will charge a low price.
b. Firm A will charge a high price, and firm B will charge a low price.
c. Firm A will charge a low price, and firm B will charge a high price.
d. Firm A will charge a high price, and firm B will charge a high price.

10. You, a real-estate developer, own a piece of land in Nassau, Bahamas, next to an equal size piece of land owned by a competitor.
Both of you have the choice of building a casino or a hotel. Your payoffs are as follows

How much is it worth to you to get your casino building permit first?
a. $2 million
b. $3 million
c. $15 million
d. $17million

Transcribed Image Text:

Firm B Low Price High Price Low Price 0,0 50,-10 Frm A High Price 10, 50 25, 25 You Casino 3, 3 5, 20 Hotel 20, 5 2, 2 Your Casino Competitor Hotel