chapter 10

A dominant strategy is a strategy that: A. results in the highest payoff to a player regardless of the opponent's action. B. guarantees the highest payoff given the worst possible scenario. C. describes a set of circumstances in which no player can improve her payoff by unilaterally changing her own strategy, given the other players' strategies. D. randomizes over two or more available actions in order to keep rivals from being able to predict a player's action.

A

Consider the following information for a simultaneous move game: If you advertise and your rival advertises, you each will earn $5 million in profits. If neither of you advertises, you will each earn $10 million in profits. However, if one of you advertises and the other does not, the firm that advertises will earn $15 million and the non-advertising firm will earn $1 million. If you and your rival plan to be in business for only one year, the Nash equilibrium is: A. for each firm to advertise. B. for neither firm to advertise. C. for your firm to advertise and the other not to advertise. D. None of the answers is correct.

A

Game theory suggests that, in the absence of patents, the privately motivated innovation decisions of firms might lead to: A. too little innovation. B. too much innovation. C. the socially efficient level of innovation. D. None of the answers is correct.

A

A Nash equilibrium with a noncredible threat as a component is: A. a perfect equilibrium. B. not a perfect equilibrium. C. a sequential equilibrium. D. a somewhat perfect equilibrium.

B

A secure strategy is a strategy that: A. results in the highest payoff to a player regardless of the opponent's action. B. guarantees the highest payoff given the worst possible scenario. C. describes a set of circumstances in which no player can improve her payoff by unilaterally changing her own strategy, given the other players' strategies. D. randomizes over two or more available actions in order to keep rivals from being able to predict a player's action.

B

Game theory is best applied to the analysis of: A. perfect competition. B. oligopoly. C. monopoly. D. All of the statements associated with this question are correct.

B

There are two existing firms in the market for computer chips. Firm A knows how to reduce the production costs for the chip and is considering whether to adopt the innovation or not. Innovation incurs a fixed setup cost of C, while increasing the revenue. However, once the new technology is adopted, another firm, B, can adopt it with a smaller setup cost of C/2. If A innovates and B does not, A earns $20 in revenue while B earns $0. If A innovates and B does likewise, both firms earn $15 in revenue. If neither firm innovates, both earn $5. Under what condition will firm B have an incentive to adopt if firm A adopts the innovation? A. C > 30 B. C < 30 C. 10 > C > 0 D. 35 > C > 25

B

A Nash equilibrium is a condition that: A. results in the highest payoff to a player regardless of the opponent's action. B. guarantees the highest payoff given the worst possible scenario. C. describes a set of circumstances in which no player can improve her payoff by unilaterally changing her own strategy, given the other players' strategies. D. randomizes over two or more available actions in order to keep rivals from being able to predict a player's action.

C

A coordination problem arises whenever there: A. is no Nash equilibrium in a game. B. is a unique Nash equilibrium but it is not very desirable. C. are multiple Nash equilibria. D. are no dominant strategies for both players.

C

Firms will try to signal superior quality of their goods by: A. making sales information available to the public. B. advertising. C. issuing warranties or guarantees. D. making sales information available to the public and advertising.

C

Game theory is especially useful for analysis in the following markets: A. Perfect competition B. Monopolistic competition C. Oligopoly D. Monopoly

C

It is easier to sustain tacit collusion in an infinitely repeated game if: A. the present value of cheating is higher. B. there are more players in the game. C. the interest rate is lower. D. the present value of cheating is higher and the interest rate is lower.

C

Which of the following is a correct statement about a Nash equilibrium in a two-player game? A. The joint payoffs of the two players are highest compared to other strategy pairs. B. A Nash equilibrium is always unique in real-world problems. C. Given another player's strategy, no player can improve her welfare by unilaterally changing her strategy. D. All of the statements associated with this question are correct.

C

Consider the following entry game: Here, firm B is an existing firm in the market, and firm A is a potential entrant. Firm A must decide whether to enter the market (play "enter") or stay out of the market (play "not enter"). If firm A decides to enter the market, firm B must decide whether to engage in a price war (play "hard"), or not (play "soft"). By playing "hard," firm B ensures that firm A makes a loss of $1 million, but firm B only makes $1 million in profits. On the other hand, if firm B plays "soft," the new entrant takes half of the market, and each firm earns profits of $5 million. If firm A stays out, it earns zero while firm B earns $10 million. Which of the following are perfect equilibrium strategies? A. (enter, soft) B. (not enter, soft) C. (enter, hard) D. (not enter, hard)

A

Consider the following innovation game: Firm A must decide whether or not to introduce a new product. Firm B must decide whether or not to clone firm A's product. If firm A introduces and B clones, then firm A earns $2 and B earns $15. If A introduces and B does not clone, then A earns $8 and B earns $1. If firm A does not introduce, both firms earn profits of 0. Which of the following is true? A. The subgame perfect Nash equilibrium profits are ($2, 15). B. The subgame perfect Nash equilibrium profits are ($8, 1). C. It is not in A's interest to introduce. D. None of the answers is correct.

A

It is easier to sustain tacit collusion in an infinitely repeated game if: A. the present value of cheating is lower than collusion. B. there are many players. C. the interest rate is higher. D. the present value of cheating is lower than collusion and the interest rate is higher.

A

Which of the following enhances the ability of waste companies to collude? A. Decals on waste receptacles B. High interest rates C. Differentiated nature of products D. Large number of firms

A

There are two existing firms in the market for computer chips. Firm A knows how to reduce the production costs for the chip and is considering whether to adopt the innovation or not. Innovation incurs a fixed setup cost of C, while increasing the revenue. However, once the new technology is adopted, another firm, B, can adopt it with a smaller setup cost of C/3. If A innovates and B does not, A earns $30 in revenue while B earns $10. If A innovates and B does likewise, both firms earn $20 in revenue. If neither firm innovates, both earn $10. Under what condition will firm B have an incentive to adopt if firm A adopts the innovation? A. C > 30 B. C < 30 C. 10 > C > 0 D. 35 > C > 25

B

Consider the following entry game: Here, firm B is an existing firm in the market, and firm A is a potential entrant. Firm A must decide whether to enter the market (play "enter") or stay out of the market (play "not enter"). If firm A decides to enter the market, firm B must decide whether to engage in a price war (play "hard"), or not (play "soft"). By playing "hard," firm B ensures that firm A makes a loss of $2 million, but firm B only makes $2 million in profits. On the other hand, if firm B plays "soft," the new entrant takes half of the market, and each firm earns profits of $4 million. If firm A stays out, it earns zero while firm B earns $8 million. Which of the following are perfect equilibrium strategies? A. (enter, soft) B. (not enter, soft) C. (enter, hard) D. (not enter, hard)

A

Consider the following information for a simultaneous move game: If you advertise and your rival advertises, you each will earn $5 million in profits. If neither of you advertises, you will each earn $10 million in profits. However, if one of you advertises and the other does not, the firm that advertises will earn $15 million and the non-advertising firm will earn $1 million. If you and your rival plan to be in business for 10 years, then the Nash equilibrium is: A. for each firm to advertise every year. B. for neither firm to advertise in early years, but to advertise in later years. C. for each firm to not advertise in any year. D. for each firm to advertise in early years, but not advertise in later years.

A

Consider the following information for a simultaneous move game: If you advertise and your rival advertises, you each will earn $5 million in profits. If neither of you advertises, you will each earn $10 million in profits. However, if one of you advertises and the other does not, the firm that advertises will earn $15 million and the non-advertising firm will earn $1 million. If you and your rival plan to hand your business down to your children (and this "bequest" goes on forever), then a Nash equilibrium when the interest rate is zero is: A. for each firm to not advertise until the rival does, and then to advertise forever. B. for your firm to never advertise. C. for your firm to always advertise when your rival does. D. for each firm to advertise until the rival does not advertise, and then not advertise forever.

A

If you advertise and your rival advertises, you each will earn $3 million in profits. If neither of you advertises, you will each earn $7 million in profits. However, if one of you advertises and the other does not, the firm that advertises will earn $10 million and the non-advertising firm will earn $1 million. If you and your rival plan to be in business for only one year, the Nash equilibrium is for your firm: A. and your rival to advertise. B. and your rival not to advertise. C. to advertise and your rival not to advertise. D. not to advertise and your rival to advertise.

A

If you advertise and your rival advertises, you each will earn $4 million in profits. If neither of you advertises, you will each earn $10 million in profits. However, if one of you advertises and the other does not, the firm that advertises will earn $1 million and the non-advertising firm will earn $5 million. Which of the following is true? A. A secure strategy for firm A is to not advertise. B. A secure strategy for firm B is to advertise. C. Firm A does not have a secure strategy. D. None of the answers is correct.

A

Management and a labor union are bargaining over how much of a $50 surplus to give to the union. The $50 is divisible up to one cent. The players have one shot to reach an agreement. Management has the ability to announce what it wants first, and then the labor union can accept or reject the offer. Both players get zero if the total amounts asked for exceed $50. Which of the following is a Nash equilibrium? A. Management requests $50 and the labor union accepts $0. B. Management requests $35 and the labor union accepts $10. C. Management requests $20 and the labor union accepts $20. D. Management requests $25 and the labor union accepts $10.

A

A finitely repeated game differs from an infinitely repeated game in that: A. The former needs a lower interest rate to support collusion than the latter needs. B. There is an end-of-period problem for the former. C. A collusive outcome can usually be sustained in the former but not the latter. D. All of the statements associated with this question are correct.

B

Consider the following innovation game: Firm A must decide whether or not to introduce a new product. Firm B must decide whether or not to clone firm A's product. If firm A introduces and B clones, then firm A earns $1 and B earns $10. If A introduces and B does not clone, then A earns $10 and B earns $2. If firm A does not introduce, both firms earn profits of 0. How many Nash equilibria are there for this game? A. 0 B. 1 C. 2 D. 0, but there are secure strategies.

B

If you advertise and your rival advertises, you each will earn $3 million in profits. If neither of you advertises, you will each earn $7 million in profits. However, if one of you advertises and the other does not, the firm that advertises will earn $10 million and the non-advertising firm will earn $1 million. If you and your rival plan to be in business for 15 years, then the Nash equilibrium is for: A. you and your rival to not advertise in any year. B. you and your rival to advertise every year. C. neither firm to advertise in early years, but to advertise in later years. D. each firm to advertise in early years, but not advertise in later years.

B

If you advertise and your rival advertises, you each will earn $4 million in profits. If neither of you advertises, you will each earn $10 million in profits. However, if one of you advertises and the other does not, the firm that advertises will earn $1 million and the non-advertising firm will earn $5 million. If you and your rival plan to be in business for only one year, the Nash equilibrium is: A. for each firm to advertise. B. for neither firm to advertise. C. for your firm to advertise and the other not to advertise. D. None of the answers is correct.

B

If you advertise and your rival advertises, you each will earn $4 million in profits. If neither of you advertises, you will each earn $10 million in profits. However, if one of you advertises and the other does not, the firm that advertises will earn $1 million and the non-advertising firm will earn $5 million. If you and your rival plan to hand your business down to your children (and this "bequest" goes on forever), then a Nash equilibrium is for each firm to: A. not advertise until the rival does, and then to advertise forever. B. never advertise. C. always advertise. D. advertise until the rival does not advertise, and then not advertise forever.

B

Management and a labor union are bargaining over how much of a $100 surplus to give to the union. The $100 is divisible up to one cent. The players have one shot to reach an agreement. Management has the ability to announce what it wants first, and then the labor union can accept or reject the offer. Both players get zero if the total amounts asked for exceed $100. Which of the following is NOT a Nash equilibrium? A. Management requests $50 and the labor union accepts $50. B. Management requests $70 and the labor union accepts $20. C. Management requests $100 and the labor union accepts $0. D. Neither management requesting $100 and the labor union accepting $0 nor management requesting $70 and the labor union accepting $20 are Nash equilibria.

B

When a worker announces that he plans to quit, say next month, the "threat" of being fired has no bite. The worker may find it in his interest to shirk. What can the manager do to overcome this problem? A. Fire the worker as soon as he announces his plans to quit. B. Provide the worker some rewards for good work that extend beyond the termination of employment with your firm. C. Monitor the worker more often than usual and fire him when he is caught shirking. D. Pay the worker some rewards when he announces his plan to quit.

B

Which of the following conditions correctly describes a Nash equilibrium when two firms are in the market? A. π1(s1*, s2*) ≥ π1(s1, s2*) for all s1. B. π1(s1*, s2*) ≥ π1(s1, s2*) for all s1 and π2(s1*, s2*) ≥ π2(s1*, s2) for all s2. C. π1(s1*, s2*) ≥ π2(s1, s2*) for all s1 and π2(s1*, s2*) ≥ π1(s1*, s2) for all s2. D. π1(s1, s2*) ≥ π2(s1*, s2*) for all s1 and π2(s1*, s2) ≥ π1(s1*, s2*) for all s2.

B

Which of the following is NOT an important determinant of collusion in pricing games? A. The number of firms B. The importance and magnitude of the item in a consumers' budget C. History D. All the statements associated with this question are important.

B

Which of the following is NOT true? A. An extensive form representation usually provides more information than a normal-form representation of a game. B. A normal-form game is most useful for sequential-move games. C. The notion of perfect equilibrium is more useful in analyzing extensive-form games than normal-form games. D. The notion of credible threats makes more sense in extensive-form representations than in normal-form representations of a game.

B

Which of the following is a correct statement? A. A Nash equilibrium is always perfect. B. A perfect equilibrium is always Nash. C. A Nash equilibrium is always perfect in a multistage game. D. None of the answers is correct.

B

Which of the following is true for a Nash equilibrium of a two-player game? A. The joint payoffs of the two players are highest compared to other strategy pairs. B. Given another player's strategy stipulated in that Nash equilibrium, a player cannot improve his welfare by changing his strategy. C. A Nash equilibrium is always unique in real-world problems. D. Given another player's strategy stipulated in that Nash equilibrium, a player cannot improve his welfare by changing his strategy, and a Nash equilibrium is always unique in real-world problems.

B

Which of the following is true? A. A Nash equilibrium is always perfect. B. A perfect equilibrium is always Nash. C. A Nash equilibrium is always perfect in a multistage game. D. Perfect equilibrium and Nash equilibrium are the same concept but with different names.

B

Which of the following is true? A. In an infinitely repeated game, collusion is always a Nash equilibrium. B. In a finitely repeated game with a certain end period, collusion is unlikely because effective punishments cannot be used during any time period. C. All of the statements associated with this question are correct. D. None of the answers is correct.

B

Consider the following entry game: Here, firm B is an existing firm in the market, and firm A is a potential entrant. Firm A must decide whether to enter the market (play "enter") or stay out of the market (play "not enter"). If firm A decides to enter the market, firm B must decide whether to engage in a price war (play "hard"), or not (play "soft"). By playing "hard," firm B ensures that firm A makes a loss of $1 million, but firm B only makes $1 million in profits. On the other hand, if firm B plays "soft,", the new entrant takes half of the market, and each firm earns profits of $5 million. If firm A stays out, it earns zero while firm B earns $10 million. Which of the following are Nash equilibrium strategies? A. (enter, hard) and (not enter, hard) B. (enter, soft) and (not enter, soft) C. (not enter, hard) and (enter, soft) D. (enter, hard) and (not enter, soft)

C

Consider the following entry game: Here, firm B is an existing firm in the market, and firm A is a potential entrant. Firm A must decide whether to enter the market (play "enter") or stay out of the market (play "not enter"). If firm A decides to enter the market, firm B must decide whether to engage in a price war (play "hard"), or not (play "soft"). By playing "hard," firm B ensures that firm A makes a loss of $2 million, but firm B only makes $2 million in profits. On the other hand, if firm B plays "soft," the new entrant takes half of the market, and each firm earns profits of $4 million. If firm A stays out, it earns zero while firm B earns $8 million. Which of the following are Nash equilibrium strategies? A. (enter, hard) and (not enter, hard) B. (enter, soft) and (not enter, soft) C. (not enter, hard) and (enter, soft) D. (enter, hard) and (not enter, soft)

C

If you advertise and your rival advertises, you each will earn $3 million in profits. If neither of you advertises, you will each earn $7 million in profits. However, if one of you advertises and the other does not, the firm that advertises will earn $10 million and the non-advertising firm will earn $1 million. If you and your rival plan to hand your business down to your children, and this "bequest" goes on forever, then a Nash equilibrium when the interest rate is zero is for: A. your firm to never advertise. B. your firm to always advertise when your rival does, provided that the interest rate is sufficiently large. C. each firm to not advertise until the rival does, and then to advertise forever provided the interest rate is sufficiently low. D. each firm to advertise until the rival does not advertise, and then not advertise forever.

C

If you advertise and your rival advertises, you each will earn $4 million in profits. If neither of you advertises, you will each earn $10 million in profits. However, if one of you advertises and the other does not, the firm that advertises will earn $1 million and the non-advertising firm will earn $5 million. If you and your rival plan to be in business for 10 years, then the Nash equilibrium is: A. for each firm to advertise every year. B. for neither firm to advertise in early years, but to advertise in later years. C. for each firm to not advertise in any year. D. for each firm to advertise in early years, but not advertise in later years.

C

If you advertise and your rival advertises, you each will earn $5 million in profits. If neither of you advertises, you will each earn $10 million in profits. However, if one of you advertises and the other does not, the firm that advertises will earn $15 million and the non-advertising firm will earn $1 million. Suppose this game is repeated for a finite number of times, but the players do not know the exact date at which the game will end. The players can earn collusive profits as a Nash equilibrium to the repeated play of the game if the probability the game terminates in any period is: A. 1. B. greater than 1. C. close to zero. D. None of the answers is correct.

C

There are two existing firms in the market for computer chips. Firm A knows how to reduce the production costs for the chip and is considering whether to adopt the innovation or not. Innovation incurs a fixed setup cost of C, while increasing the revenue. However, once the new technology is adopted, another firm, B, can adopt it with a smaller setup cost of C/2. If A innovates and B does not, A earns $20 in revenue while B earns $0. If A innovates and B does likewise, both firms earn $15 in revenue. If neither firm innovates, both earn $5. If C = 15, which is the perfect equilibrium of the game? A. A innovates, B does not. B. A innovates, B innovates. C. Neither firm innovates. D. None of the answers is correct.

C

There are two existing firms in the market for computer chips. Firm A knows how to reduce the production costs for the chip and is considering whether to adopt the innovation or not. Innovation incurs a fixed setup cost of C, while increasing the revenue. However, once the new technology is adopted, another firm, B, can adopt it with a smaller setup cost of C/2. If A innovates and B does not, A earns $20 in revenue while B earns $0. If A innovates and B does likewise, both firms earn $15 in revenue. If neither firm innovates, both earn $5. Under what condition will firm A innovate? A. C > 30 B. C < 30 C. 10 > C > 0 D. 35 > C > 25

C

There are two existing firms in the market for computer chips. Firm A knows how to reduce the production costs for the chip and is considering whether to adopt the innovation or not. Innovation incurs a fixed setup cost of C, while increasing the revenue. However, once the new technology is adopted, another firm, B, can adopt it with a smaller setup cost of C/3. If A innovates and B does not, A earns $30 in revenue while B earns $10. If A innovates and B does likewise, both firms earn $20 in revenue. If neither firm innovates, both earn $10. If C = 12, which is the perfect equilibrium of the game? A. A innovates, B does not. B. A innovates, B innovates. C. Neither firm innovates. D. None of the answers is correct.

C

There are two existing firms in the market for computer chips. Firm A knows how to reduce the production costs for the chip and is considering whether to adopt the innovation or not. Innovation incurs a fixed setup cost of C, while increasing the revenue. However, once the new technology is adopted, another firm, B, can adopt it with a smaller setup cost of C/3. If A innovates and B does not, A earns $30 in revenue while B earns $10. If A innovates and B does likewise, both firms earn $20 in revenue. If neither firm innovates, both earn $10. Under what condition will firm A innovate? A. C > 30 B. C < 30 C. 10 > C > 0 D. 35 > C > 25

C

Which of the following is the major means to signal good quality of goods by firms? A. Sales B. Advertisements C. Warranties/guarantees D. Both sales and advertisements

C

A coordination problem usually occurs in situations where there is: A. no Nash equilibrium in a game. B. a unique, but undesirable Nash equilibrium. C. a unique, secure strategy for both players. D. more than one Nash equilibrium.

D

A mixed strategy is a strategy that: A. results in the highest payoff to a player regardless of the opponent's action. B. guarantees the highest payoff given the worst possible scenario. C. describes a set of circumstances in which no player can improve her payoff by unilaterally changing her own strategy, given the other players' strategies. D. randomizes over two or more available actions in order to keep rivals from being able to predict a player's action.

D

Collusion is: A. legal in the United States. B. not possible when firms interact repeatedly forever. C. more likely in industries with a large number of firms. D. None of the answers is correct.

D

Consider the following innovation game: Firm A must decide whether or not to introduce a new product. Firm B must decide whether or not to clone firm A's product. If firm A introduces and B clones, then firm A earns $1 and B earns $10. If A introduces and B does not clone, then A earns $10 and B earns $2. If firm A does not introduce, both firms earn profits of 0. Which of the following is true? A. The subgame perfect Nash equilibrium profits are ($10, $2). B. It is not in A's interest to introduce. C. Firm A does not care if B clones. D. None of the answers is correct.

D

Economists use game theory to predict the behavior of oligopolists. Which of the following is crucial for the success of the analysis? A. Make sure the payoffs reflect the true payoffs of the oligopolists. B. Determine whether the oligopolists move simultaneously or sequentially. C. Determine whether the problem considered is of a one-shot or a repeated nature. D. All of the statements associated with this question are correct.

D

If you advertise and your rival advertises, you each will earn $4 million in profits. If neither of you advertises, you will each earn $10 million in profits. However, if one of you advertises and the other does not, the firm that advertises will earn $1 million and the non-advertising firm will earn $5 million. Suppose this game is repeated for a finite number of times, but the players do not know the exact date at which the game will end. The players can earn profits of $10 each period as a Nash equilibrium to a repeated play of the game if the probability the game terminates at the end of any period is: A. close to 1. B. close to 0. C. between 0 and 1. D. All of the statements associated with this question are correct.

D

If you advertise and your rival advertises, you each will earn $4 million in profits. If neither of you advertises, you will each earn $10 million in profits. However, if one of you advertises and the other does not, the firm that advertises will earn $1 million and the non-advertising firm will earn $5 million. Which of the following is true? A. A dominant strategy for firm A is to advertise. B. A dominant strategy for firm B is to advertise. C. A Nash equilibrium is for both firms to advertise. D. None of the answers is correct.

D

If you advertise and your rival advertises, you each will earn $5 million in profits. If neither of you advertises, you will each earn $10 million in profits. However, if one of you advertises and the other does not, the firm that advertises will earn $15 million and the non-advertising firm will earn $1 million. Which of the following is true? A. A dominant strategy for firm A is to advertise. B. A dominant strategy for firm B is to advertise. C. A Nash equilibrium is for both firms to advertise. D. All of the statements associated with this question are correct.

D

If you advertise and your rival advertises, you each will earn $5 million in profits. If neither of you advertises, you will each earn $10 million in profits. However, if one of you advertises and the other does not, the firm that advertises will earn $15 million and the non-advertising firm will earn $1 million. Which of the following is true? A. A secure strategy for firm A is to not advertise. B. A secure strategy for firm B is to not advertise. C. Firm A does not have a secure strategy. D. None of the answers is correct.

D

When analyzing the behavior of oligopolists, which of the following is crucial for the success of game theoretic analysis? A. Payoffs do not need to reflect the true payoffs of the oligopolists, they just need to be greater than or equal to zero. B. Assume that oligopolists always move simultaneously. C. Do not construct the payoffs of the oligopolists to be interdependent, as the payoff of one player usually does not affect the payoff of the other players. D. Make sure the problem you are considering is of a one-shot or repeated nature, and you model it accordingly because the order in which players make decisions is important.

D

Which of the following are important determinants of collusion in pricing games? A. The number of firms B. Firm size C. History D. All of the statements associated with this question are correct.

D

Which of the following conditions are necessary for the existence of a Nash equilibrium? A. The existence of dominant strategies for both players. B. The existence of a dominant strategy for one player and the existence of a secure strategy for another player. C. The existence of a secure strategy for both players. D. None of the answers is correct.

D

Which of the following is NOT an important determinant of collusion in pricing games? A. The number of firms in the industry. B. The punishment mechanisms that are in place. C. The history of the particular market. D. None of the answers is correct.

D

Which of the following is NOT true? A. An extensive form representation usually provides more information than a normal-form representation of a game. B. An extensive form game is most useful for sequential-move games. C. The notion of perfect equilibrium is more useful in analyzing extensive form games than normal-form games. D. The notion of credible threats makes more sense in normal-form representations than in extensive form representations of a game.

D

Which of the following is a factor(s) affecting collusion in an infinitely repeated pricing game? A. Number of firms B. Firm size C. History D. All of the statements associated with this question are correct.

D

Which of the following is a valid critique of the use of game theory in economics? A. Payoffs to players may be difficult to measure. B. Players may not have complete information about each other's payoffs. C. Game theory assumes rational players. D. All of the statements associated with this question are correct.

D

Which of the following is true? A. For a finitely repeated game, the game is played enough times to effectively punish cheaters, and therefore collusion is likely. B. In an infinitely repeated game with a low interest rate, collusion is unlikely because the game unravels so that effective punishment cannot be used during any time period. C. A secure strategy is the optimal strategy for a player no matter what the opponent does. D. None of the answers is correct.

D

Which of the following is true? A. In a one-shot game, a collusive strategy always represents a Nash equilibrium. B. A perfect equilibrium occurs when each player is doing the best he can regardless of what the other player is doing. C. Each Nash equilibrium is a perfect equilibrium. D. Every perfect equilibrium is a Nash equilibrium.

D