micro review questions

a coalition of firms who agree to restrict output for the purpose of earning an economic profit is called

cartel

a prisoner's dilemma illustrates situations in which

there is a conflict between the narrow self interest of individuals and the broader interests of a group

in sequential games, the player who moves first

sometimes has an advantage and sometimes has a disadvantage

game theory provides tools that are used to model

strategic interdependencies

cartel agreements are difficult to sustain bc

its a dominant strategy for each cartel member to cheat on the cartel agreement

game theory is not useful in understanding perfect competition because in a perfectly competitive market

no single firm can influence the market price, so firms' decisions are not interdependent

emotions like guilt and sympathy

can save commitment problems

the reason that the prisoner's dilemma presents a dilemma is that

each player has an incentive to play his or her dominant strategy, but when both choose the dominant strategy each player has a lower payoff than if they both chosen their dominated strategies

a decision tree is used when modeling

games in which timing matters

a credible threat is

in the threatener's interest to carry out

most cartels cease to be effective bc

of the incentive to cheat on the cartel agreement

a purely self interested diner is more likely to tip

only when dining in a restaurant at which he often eats

equilibrium happens in decision tree when

player 1 does safest thing to ensure money and player 2 chooses most money from there

a prisoner's dilemma is a game in which

the player's payoffs are smaller when both play their dominant strategy compared to when both play a dominated strategy

in the nash equilibrium of a prisoner's dilemma

there is unrealized opportunity for both to gain

a commitment problem exists when people cannot achieve their goals because

they cannot make credible threats or promises