Chapter 13

Is a​ player's best response in a game the same as his dominant​ strategy?

Not necessarily. If a player has a dominant​ strategy, then it is his best​ response; however, every best response is not always a dominant strategy.

a) In which of the following​ cases, do the players randomize their​ strategies? ​(Check all that apply​.) b) Which of the following factors make it difficult to evaluate whether game theory applies to real life​ situations? ​(Check all that apply​.)

a) A game in which Ronny and Stella have two options to either accept or to reject. A game of​ rock-paper-scissors. b) The payoffs are not precisely known. Individuals may differ from each other in many aspects.

Although there are many examples of game theory in the real​ world, how well do you think specifics like payoff​ matrices, Nash​ equilibrium, and dominant strategies translate to​ reality? Which of the following are potential reasons game theory differs from​ reality?

Payoffs are determined by the attitudes and feelings of individuals as well as by their monetary returns. One player may be more​ cunning, wiser, or more experienced than another. This is the correct answer.

Why might game theory not always be an accurate predictor of​ real-world situations?

We do not always know the exact​ payoffs, since payoffs involve attitudes and feelings as well as monetary gains.

Two gas​ stations, A and​ B, are locked in a price war. Each player has the option of raising its price​ (R) or continuing to charge the low price​ (C). They will choose strategies simultaneously. If both choose​ C, they will both suffer a loss of -$25 a) Does either player have a dominant​ strategy? Explain. b)

a) The stations do not have dominant strategies because what works best depends on what the other station does. b) The Nash equilibria are for Station A to pick C and Station B to pick R and for Station A to pick R and Station B to pick C.

a) In a​ zero-sum game the players are better off by b) Which of the following is not an example of a​ zero-sum game?

a) choosing a mixed strategy because it enables randomization b) A brutal and terrible war between two nations that significantly impaired civil life. A trade agreement that increases gains for both of the nations involved.

a) In a trust game that is only played​ once, you would be most inclined to trust someone who ____ b) Suppose there is a new website called​ Badtipper.com, where restaurant servers post pictures of bad tippers along with scathing commentary. Knowledge of this website is most likely to change the behavior of individuals with a​ ____

a) claims she gains happiness from helping others. b) low degree of social preferences.

a) A​ first-mover advantage occurs if​ ____ b) Suppose you were playing​ rock-paper-scissors as an extensive from​ game; first you choose​ rock, or​ paper, or​ scissors, and then your opponent makes a choice. Is there a​ first-mover advantage in this​ game? c) Two firms are thinking of entering a new market. If one enters it will be successful but if a second enters both will suffer very large losses. Is there a​first-mover advantage in this​ game?

a) the first mover to act in a sequential game gets a benefit from doing so. b) ​No, if you show your move first you will lose every time. c) Yes. The firm that goes first can enter and the firm that goes second will have no incentive to enter.

A dominant strategy equilibrium exists​ if

the relevant strategy for each player is a dominant strategy.

One significant difference between​ extensive-form and​ simultaneous-move games​ is ____

the timing of moves changes in​ extensive-form games.

What is the difference between a pure strategy and a mixed​ strategy?

A pure strategy involves choosing one​ action, while a mixed strategy involves choosing different actions randomly according to preassigned probabilities.