7.

In a classic prisoners' dilemma with two accomplices in crime, the dominant strategy for each individual is to:(10 Points)

never confess

always confess

confess only if the other confesses

This game does not have a dominant strategy

confess only if the other does not confess

8.

The Orlando theme park industry tends to follow a price leadership model. This means that:(10 Points)

each theme park sets its own price and operating hours independent of what other parks do

Disney, the largest firm, often sets a price and rival them parks then follow with similar, if not identical, prices

Disney, the largest firm, often sets prices only to be undercut by rival firms who prefer to engage in price wars

in written agreements each firm explicitly agrees to charge identical prices

the government dictates specific prices and all firms are obligated to follow

9.

Two firms have tacitly colluded on price-setting for several years. If this tacit agreement breaks down, it is likely to trigger a(n)(10 Points)

Justice Department investigation

antitrust prosecution

price wars

elimination of advertising expenditures

increase in combined profits

10.

Gary's Gas and Frank's Fuel are the only two providers of gasoline in Smalltown. Gary and Frank decide to form a cartel. Later, Gary summarizes his pricing strategy as, "I'll cheat on the cartel because regardless of what Frank does, cheating give me the best payoff". This is an example(10 Points)

a dominant strategy

a tit for tat strategy

an irrational strategy

product differentiation

price discrimination

11.

Game theory is commonly used to explain behavior in oligopolies, because oligopolies are characterized by:(10 Points)

large profits in the long run

either homogeneous or heterogeneous products

interdependence

imperfect competition

price-taking behavior

12.

Gary's Gas and Frank's Fuel are the only two providers of gasoline in Smalltown. Gary summarizes his price strategy as, "I'll do to Frank what Frank did to me last time." This is an example of:(10 Points)

a dominant strategy

a tit for tat strategy

an irrational strategy

product differentiation

explicit collusion