One way to ensure cooperation in an infinitely repeated simultaneous game is A) to always play the dominant strategy. B) to punish the player that reneges on agreements. C) to never punish any player. D) to always punish all players. ANSWER B
Which of the following is a dynamic game? A) rock-paper-scissors B) flipping pennies C) chess D) the card game “war” ANSWER C
Why don’t we see firms tie in the sales of fish filets with the sales of pencils? A) because the demands for these two goods are positively correlated B) because the demands for these two goods are negatively correlated C) because the demands for these two goods are independent D) It violates the Clean Food […]
A trigger strategy A) is always a dominant strategy. B) is used to punish the player that reneges on agreements. C) is used to reward the player that never reneges on agreements. D) is a best response whenever all players cooperate. ANSWER B
Repeated games are conducive to A) explicit cooperation. B) tacit cooperation. C) corruption. D) failing to have a Nash equilibrium. ANSWER B
A firm that holds a monopoly in both goods stands to gain from a tie-in sale. A) True. B) False. C) True, which is why anti-trust laws exist. D) False, there are no dual monopolies. ANSWER B
One interesting feature of a prisoner’s dilemma game is that A) non-cooperative behavior leads to lower payoffs than cooperative behavior. B) it was only valid before the industrial revolution. C) individuals behave irrationally when they behave non-cooperatively. D) cooperative behavior leads to lower payoffs than non-cooperative behavior. ANSWER A
A photograph processing machine company requiring customers who buy a processing machine to purchase chemicals and photographic paper from it is an example of A) bundling. B) a requirement tie-in sale. C) nonlinear pricing. D) two-part pricing. ANSWER B
A player can choose among three strategies: T, M, and B. Nevertheless, strategy B is dominated by strategy T. This means that A) strategy T is always played. B) strategy B is never played. C) strategy B will be part of a Nash equilibrium. D) strategy M is never played. ANSWER B
Which of the following is NOT part of solving a game? A) Write down all possible combinations of strategies. B) Write down all possible payoffs and eliminate dominated strategies. C) Solve for any Nash Equilibrium. D) None of the above. ANSWER D