Econ 421: test 2

in order to compute the equilibria of games with infinite strategy spaces, one need only compute the best-response mappings for each player and then determine which strategy profiles, if any, satisfy them all simultaneously. 1. True 2. False

1. True

Laboratory experiments in game theory 1. afford the experimenter considerable control over the strategic environment. 2. often pay poorly, as in other disciplines. 3. are able to control all aspects of subjects' payoffs. 4. find that all subjects are hyper-rational, respecting an infinite number of rounds of iterated dominance.

1. afford the experimenter considerable control over the strategic environment.

Which of the following is true? 1. Some games have no Nash equilibria even when taking into account MSNE. 2. Games are likely to have an MSNE when the best responses all align on a single strategy profile. 3. Unless some player has the same payoff for multiple strategy profiles, there will be an odd number of NE (that is, MSNE + PSNE).

3. Unless some player has the same payoff for multiple strategy profiles, there will be an odd number of NE (that is, MSNE + PSNE).

Strategic uncertainty 1. is not a problem in real life. 2. cannot be overcome by communication and coordinating institutions. 3. is manifested in the coordination problem. 4. is ruled out by rationalizability.

3. is manifested in the coordination problem.

We can only perform the iterated dominance procedure using the logic of rationalizability if players have 1. common knowledge of rationality. 2. more than one dominated strategy. 3. common knowledge of the game. 4. 1 and 3.

4. 1 and 3.

In the Cournot game described in Chapter 10, 1. firms underproduce relative to their joint optimal production levels. 2. in the Nash equilibrium strategy profile, each firm produces 225,000 red bricks. 3. the firm's private costs and benefits of raising quantity equal joint costs and benefits. 4. If each firm produces 225,000 bricks, this maximizes the sum of the firms' profits.

4. If each firm produces 225,000 bricks, this maximizes the sum of the firms' profits.

Rationalizability would be the appropriate behavioral concept if 1. you need to locate your friend at Disneyworld after agreeing on a place to meet. 2. we could assume there is strategic certainty. 3. you don't understand how to solve for Nash equilibrium. 4. players had little history in common on which to coordinate their beliefs.

4. players had little history in common on which to coordinate their beliefs.

Socially inefficient outcomes/equilibria can occur 1. because individual incentives interfere with the interests of the group. 2. because there is more than one way to coordinate. 3. in the Pareto coordination game. 4. in the real world, as in the VHS / Betamax example. 5. All of the above.

5. All of the above.

Strategic uncertainty can be resolved through 1. norms. 2. historical factors. 3. communication. 4. history. 5. all of the above.

5. all of the above.

A mixed-strategy Nash equilibrium (MSNE) is a mixed-strategy profile having the property that no player could increase his or her payoff by switching to any other strategy, given the other player's strategy. 1. This is a straightforward extension to mixed strategies of the Nash equilibrium concept of Chapter 9 (that is, that players' strategies are best responses to one another). 2. An MSNE is fundamentally different from a Nash equilibrium. 3. There is no way to formally write a pure strategy Nash equilibrium as an MSNE.

This is a straightforward extension to mixed strategies of the Nash equilibrium concept of Chapter 9 (that is, that players' strategies are best responses to one another).

A Nash equilibrium 1. is defined relative to strategy profiles: that is, the strategies of all players must meet the conditions of the definition in order for there to be an equilibrium. 2. may not be a rationalizable strategy profile. 3. may involve significant strategic uncertainty.

is defined relative to strategy profiles: that is, the strategies of all players must meet the conditions of the definition in order for there to be an equilibrium.