Econ Homework 14

The - advantage is an advantage that a player receives by moving first in a sequential game.

Blank 1: first Blank 2: mover

A(n) strategy is a situation in which a particular strategy yields the highest payoff - regardless of the other player's strategy.

dominant

An outcome in which, unless the players can collude, neither player has an incentive to change his or her strategy is:

a Nash equilibrium.

A situation in which a particular strategy yields the highest payoff, regardless of the other player's strategy, is:

a dominant strategy.

Less aggressive competition is most likely to occur when

a game is played repeatedly.

A table showing the potential outcomes arising from the choices made by decision makers is:

a payoff matrix.

Games can have more than one Nash equilibrium. (True or False)

True

A situation in which a game is played a number of times, sometimes infinitely, is known as a

repeated game.

A prisoner's dilemma is a term used to describe a situation in which the equilibrium is not the outcome that maximizes the payoffs to both players.

Nash

A Nash is an outcome in which, unless the players can collude, neither player has an incentive to change his or her strategy.

equilibrium

Game theory is the study of the behavior of decision makers.

strategic

The game tree depicts the research spending strategies and profit payoffs for two firms operating in the pharmaceutical industry. Assuming both firms are maximizing profit, what will the outcome of this game be?

Both Pharm Corp and New Pills will have high spending on research.

Referring to the payoff matrix, suppose two firms, Firm Y and Firm X, in an oligopoly want to compete based on pricing. What is Firm X's dominant strategy?

High price

A(n) equilibrium is an outcome in which, unless the players can collude, neither player has an incentive to change his or her strategy

Nash

The game tree depicts the research spending strategies and profit payoffs for two firms operating in the pharmaceutical industry. If Pharm Corp chooses low spending on research, what is New Pill's best option?

New Pill will spend high and earn $20 million.

The game tree depicts the research spending strategies and profit payoffs for two firms operating in the pharmaceutical industry. If Pharm Corp decides to have low spending on research, but New Pills decides to have high spending, what is the profit outcome for the firms?

Pharm Corp will earn $5 million and New Pills will earn $20 million.

The game tree depicts the pricing spending strategies and profit payoffs for two firms operating in the cleaning service industry. Assuming both firms are maximizing profit, what will the outcome of this game be?

Speedy Cleaner will charge a high price, but Clean R Us will charge a low price.

Which of the following aspects of oligopolistic firms does game theory help us study?

Their strategic behaviour

When firms, individuals, or any group of economic actors engage in , they coordinate their actions to achieve a desired outcome.

collusion

A situation in which individuals, firms, or any group of actors coordinate their actions to achieve a desired outcome is:

collusion.

When a player moves first in a sequential game, thereby influencing the set of possible outcomes they experience the

first-mover advantage.

theory helps us study the strategic behavior of oligopolistic firms.

game

theory is the study of the strategic behavior of decision makers.

game

In game theory, a repeated game is played

many, sometimes an infinite number, times.

A game tree is a

mapping tool that shows the strategies available to players engaged in a sequential game.

A payoff is a table showing the potential outcomes arising from the choices made by decision makers.

matrix

Games can have:

more than one Nash equilibrium.

Backward induction is the process of

identifying optimal strategies by starting at the end of a game tree and moving toward its origin.

Compared to a one period game, repeated games are more likely to result in

less aggressive competition.

A is a mapping tool that shows the strategies available to players engaged in a sequential game.

Blank 1: game Blank 2: tree

The game depicts the pricing decision for two firms producing bottled water and their profits. Mountain Water profits are depicted in purple and Stream Fresh is in gray. If the firms plan to remain in the market for the foreseeable future and decide to not compete on price, what is the likely pricing decision for the firms?

Both Mountain Water and Stream Fresh will price high.

The game depicts the pricing decision for two firms operating in the cleaning service industry and their profits. Speedy Cleaner's profits are depicted in purple and Clean R Us is in gray. Suppose that the firms do not have any immediate plans to leave the market and expect to compete with each other for many years to come. What noncollusive outcome might we expect to result if the firms decide on a less aggressive pricing strategy?

Both Speedy Cleaner and Clean R Us will price high.

Referring to the payoff matrix, suppose two firms, Firm A and Firm B, in an oligopoly want to compete based on pricing. What is Firm A's dominant strategy?

Low price

The process of identifying optimal strategies by starting at the end of a game tree and moving toward its origin is known as

backward induction.

A(n) matrix is a table showing the potential outcomes arising from the choices made by decision makers.

payoff

A dominant is a situation in which a particular strategy yields the highest payoff, regardless of the other player's strategy.

strategy