1. Farah clothing manufacturer wishes to attract hard-working employees. What type of compensation scheme do you recommend to her in order to most effectively screen the workers and reward them according to their work?

2.Define Commitment in the context of Game Theory.

3.In the context of Game Theory, what does Threat mean? When a threat would be effective?

4.What does Signal in economics mean and what would it accomplish?

5.What does Reputation in economics mean and what should its characteristics be to have any economic value?

6.You are about to enter a gas station to fill up your tank. It takes $40 for you to fill up. Just about the time you want to enter the gas station you hear on the radio that another gas station will give $5 refund on every $40 gas purchase. The gas stations are identical in all respects and the brand is also the same. The second gas station, however, is one mile away. As a rational person, what would you do?

7.You are online placing an order for a car. The order is placed at the manufacturer's web site and the car is made to your specification. At the end of the process, the car is priced at $25,000 and you have to choose the dealership you want to pick up your car from. There are two choices available to you and both are identical in every respect. The first dealership is 5 miles away and requires a $25,000 cashier's check from you upon delivery. The second dealership is 5 miles away and also requires a $25,000 cashier's check. However, the second dealership gives you $5 cash back on the spot. As a rational mazimizer which dealership should you choose?

8.Air America and Omega Airlines secretly reach an agreement to keep their prices high. Therefore, each airline has two possible alternatives, charge high prices or charge low prices. The appropriate annual payoffs are presented in the matrix below. First numbers in each cell refer to Air America while the second one refers to Omega Airlines.

Omega Airlines

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High prices Low Prices

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High prices $200 mill. ; $250 mill. $120 mill. ; $300 mill.

Air America ----------------------------------------------------------------------

Low Prices $280 mill.; $110 mill. $180 mill.; $180 mill.

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A)If this were a onetime situation, what would be the most likely outcome of this scenario?

B) Assume this is a repeated situation and both airlines are capable of standing the effects of the first blow. Omega Airlines, accordingly decides to move first and then follow a "tit-for-tat" strategy. What do you expect to be the outcome in this market?

C) Assume this is a repeated situation and both airlines are capable of standing the effects of the first blow. Omega Airlines, accordingly decides to move first and then follow a "tit-for-tat" strategy. What do you expect to be the eventual outcome in this market?

9.Assume the final match of the Soccer World Cup is held in your town and you paid $200 for a ticket to the game. The maximum price you would pay for such a ticket is $500. On the day of the game, as you want to enter the stadium, someone offers you $1,000 for your ticket. As a rational maximizer what should you do?

10.You purchased a ticket to a concert for $30 a month ago. Last week someone invited you to a party on the same night as the concert. You would much rather go to the party than the concert. You have tried unsuccessfully to sell the concert ticket. Which of the following statements regarding this situation is correct?

A)As a rational maximizer, which one of the following scenarios would make you happier:

B)You come home and find a check in the mail for $50 prize you won.

C)You come home and find out you won $100 cash but you also receive a $50 parking ticket for a violation of which you were unaware?