MBA 642 Module 6

From the previous question, if in Argentina you could alternatively set up a distribution system that would generate $20 million in annual value to you, negotiating with the government would allow you to capture A: $50 million. B: $70 million. C: $60 million. D: $40 million.

A: $50 million.

You calculate that in each of 2 countries, Chile and Argentina, your pharmaceutical firm would earn $60 million annually by partnering with one distributor, but $80 million if two distributors carry your product line. If in Chile these distributors are private firms with which you can negotiate separately, based on the nonstrategic view of bargaining, you would capture A: $60 million. B: $50 million. C: $40 million. D: $70 million.

A: $60 million.

In the previous question, if collusion was legal it would be optimal for A: Coke to advertise and Pepsi not to advertise. B: neither to advertise. C: Pepsi to advertise and Coke not to advertise. D: both to advertise

A: Coke to advertise and Pepsi not to advertise.

When the game in the question above is played sequentially, it has A: a second-mover advantage. B: an advantage for Microsoft, because it is larger. C: a first-mover advantage. D: the same Nash equilibrium regardless of who moves first.

A: a second-mover advantage.

Suppose that for iPhones, apps are used rarely by low-value owners but intensively by high-value owners. If Apple also exclusively supplied all apps compatable with iPhones, it would maximize profits by setting a A: low price for iPhones and charging a fee to download each app. B: high price for iPhones and charging a fee to download each app. C: low price for iPhones and not charging for apps. D: high price for iPhones and not charging for apps.

A: low price for iPhones and charging a fee to download each app.

Microsoft and a smaller rival must choose between two competing technologies. Because compatibility benefits the smaller firm, Microsoft wants to select a different technology from its rival, while the rival prefers to select the same technology as Microsoft. When the two companies make their technology choices simultaneously, the Nash equilibrium is A: there is no Nash equilibrium. B: the two outcomes in which they choose different technologies are both Nash equilibria. C: the two outcomes in which they choose the same technology are both Nash equilibria. D: impossible to determine without knowledge of the specific payoffs.

A: there is no Nash equilibrium.

The table below gives the value of a 20 oz. draft of each brand of beer at a restaurant to 2 types of consumers, with MC = $1 for Shiner and $2 for Guinness. If patrons are equally likely to be either consumer type, the restaurant maximizes profits by setting prices of A B Guinness $8 $5 Shiner $4 $3 A: $3 regardless of brand. B: $3 for Shiner and $7 for Guinness. C: $5 regardless of brand. D: $3 for Shiner and $8 for Guinness.

B: $3 for Shiner and $7 for Guinness.

From the previous question, if in Argentina both distributors are government-run, negotiating with the government would allow you to capture A: $70 million. B: $40 million. C: $60 million. D: $50 million.

B: $40 million.

In the question above, the value to you in being able to move first or second (whichever you preferred) is A: $2 million. B: $7 million. C: $1 million. C: $8 million.

B: $7 million.

The table below shows the monthly profits (in millions of $) of Coke (row player, left entry) and Pepsi (column player, right entry) with and without advertising. The Nash equilibrium is Pepsi Advertise Do not advertise Coke Advertise 90, 75 300, 50 Do not advertise 60, 280 160, 110 A: there is no Nash equilibrium. B: both advertise. C: neither advertise. D: both combinations of one advertising and the other not advertising are Nash equilibria.

B: both advertise.

You and I own equal-sized adjacent pieces of land in our city, which has abruptly legalized casino gambling. We can each build either a casino or a hotel, with our annual profits (in millions of $) indicated in the table below. Like the textbook, payoffs are designated as (Me payoff, You payoff) within each cell. If we make our choices simultaneously, the Nash equilibrium is You Casino Hotel Me Casino 2, 2 10, 3 Hotel 3, 10, 0,0 A: there is no Nash equilibrium. B: both outcomes in which we build one of each are Nash equilibria. C: we both build casinos. D: we both build hotels.

B: both outcomes in which we build one of each are Nash equilibria.

If Zime has equal numbers of students with the values indicated in the table below but cannot distinguish between the two student types, and MC is 10 cents for coffee and 40 cents for a banana, it maximizes profits by offering a Asleep Lethargic Banana 50 cents $1.00 Coffee 70 cents 60 cents A: bundled price of $1.60 for coffee and a banana. B: choice between coffee for a price of 70 cents, or coffee and a banana for a bundled price of $1.60. C: price of 60 cents for coffee and $1.00 for a banana. D: bundled price of $1.20 for coffee and a banana.

B: choice between coffee for a price of 70 cents, or coffee and a banana for a bundled price of $1.60.

A Nash equilibrium occurs when A: at least one player's payoff is maximized. B: each player's payoff is maximized given the action of the other players. C: each player's payoff is maximized. D: the total payoff to all players is maximized.

B: each player's payoff is maximized given the action of the other players.

You've entered into a contract to purchase a new house, but expect that the sellers will try to add extra fees at the closing. From a bargaining standpoint, your most advantageous option is to A: each of these options is equally (un)attractive. B: pre-sign the closing documents specifying the current terms and not attend the closing. C: send an attorney, authorized to close only if the current terms are not altered, to the closing. D: attend the closing yourself.

B: pre-sign the closing documents specifying the current terms and not attend the closing.

When willingness to pay for a bundle of products is more homogeneous across consumers than willingness to pay for each product separately, bundled pricing increases A: neither consumer nor producer surplus. B: producer surplus. C: consumer surplus. D: both consumer and producer surplus.

B: producer surplus.

When bargaining with a customer, larger profits are possible when the bargaining is over A: either the unit or bundled price, as profitability is the same for each. B: the bundled price. C: the unit price. D: neither the unit or bundled price, as bargaining always lowers profits.

B: the bundled price.

If each customer of a t-shirt seller values the first shirt at $7, second at $6, third at $5, fourth at $4, fifth at $3, sixth at $2 and seventh at $1, and MC = $1.50 for each shirt, the seller maximizes profits by setting a price of A: $5 each for the first 3 shirts purchased & $3 for each additional shirt. B: $5/shirt. C: $27 for 6 shirts. D: $2/shirt.

C: $27 for 6 shirts.

In the scenario of the previous two questions, the most profitable indirect price discrimination scheme is A: $27 for 6 shirts. B: a fixed fee of $18 and a price of $1.50/shirt. C: all three are equally profitable. D: $7 for the 1st shirt, $6 for the 2nd, $5 for the 3rd, $4 for the 4th, $3 for the 5th, and $2 for the 6th.

C: all three are equally profitable.

A problem with applying the strategic view of bargaining is that A: credible commitments are difficult to make because following through would contradict your self-interest. B: neither of these, each of which are problems only with the non-strategic view. C: both of these are problems with the strategic view. D: real-world bargaining rarely has well-defined rules.

C: both of these are problems with the strategic view.

An employer wants to hire you and can offer you either a high or low salary, which you can either accept or reject. You can maximize your payoff by A: accepting the offer, which will be high. B: accepting the offer, even though it will be low. C: credibly committing to rejecting a low offer before the employer makes an offer. D: rejecting the offer, because it will be low.

C: credibly committing to rejecting a low offer before the employer makes an offer.

In the question above, if we make our choices sequentially, you would prefer to A: move first and build a hotel. B: move second and build a hotel. C: move first and build a casino. D: move second and build a casino.

C: move first and build a casino.

Indirect price discrimination requires A: both identifying low- and high-value consumers and preventing arbitrage between them. B: not necessarily identifying low- and high-value consumers, just preventing arbitrage between them. C: neither identifying low- and high-value consumers nor preventing arbitrage between them. D: identifying low- and high-value consumers, but not that arbitrage between them is prevented.

C: neither identifying low- and high-value consumers nor preventing arbitrage between them.

In the following strategic bargaining game between management and labor, the Nash equilibrium is Labor Bargain hard Be nice Management Bargain hard 0, 0 28, 12 Be nice 16, 24 20, 20 A: there are no Nash equilibria. B: both sides bargain hard. C: the two combinations in which one bargains hard and the other is nice are each Nash equilibria. D: both sides are nice.

C: the two combinations in which one bargains hard and the other is nice are each Nash equilibria.

A problem for Apple in the previous question is that "tying" sales of iPhones and apps would A: reduce revenues. B: do all of these. C: violate antitrust law. D: raise costs.

C: violate antitrust law.

Dan and Eric are trying to decide whether to quit their jobs, which pay $120,000 and $60,000 per year, respectively, to jointly open up a taco stand on the beach which they expect to earn $300,000 per year. The nonstrategic view of bargaining predicts that the split of the annual taco stand profits will be A: Dan gets $200,000 and Eric gets $100,000. B: inapplicable, because the taco stand doesn't earn enough to make quitting their jobs worthwhile. C: each gets $150,000. D: Dan gets $180,000 and Eric gets $120,000.

D: Dan gets $180,000 and Eric gets $120,000

In the scenario above, a profit-maximizing two-part pricing scheme would be to charge A: $27 for 6 shirts. B: each of these is an equivalent two-part pricing scheme. C: $7 for the 1st shirt, $6 for the 2nd, $5 for the 3rd, $4 for the 4th, $3 for the 5th, and $2 for the 6th. D: a fixed fee of $18 and a price of $1.50/shirt.

D: a fixed fee of $18 and a price of $1.50/shirt.

In a repeated prisoners' dilemma, the "grim strategy" involves cooperating until your competitor cheats, and then cheating forever. This is consistent with all of the following rules of thumb for maximizing payoffs in a repeated prisoners' dilemma, except for being A: easily provoked. B: nice. C: clear. D: forgiving.

D: forgiving.

Based on the nonstrategic view of bargaining, A: all of these are true. B: offering salespeople bonuses will raise the prices that they negotiate with customers. C: the optimal time for shop for a car, from the consumer's point of view, is when many other consumers are car-shopping. D: labor unions improve their bargaining position by threatening to strike when seasonal demand is high, rather than low.

D: labor unions improve their bargaining position by threatening to strike when seasonal demand is high, rather than low.

Based on the nonstrategic view, bargaining power is higher for A: labor unions in the private sector than in the public sector. B: labor unions than management, in professional sports leagues. C: all of these are true. D: pharmaceutical firms when they negotiate with retail pharmacies than with hospitals.

D: pharmaceutical firms when they negotiate with retail pharmacies than with hospitals.

If the bargaining game in the previous question was played sequentially, each side would A: prefer to move second. B: prefer that management moves first. C: be indifferent between moving first or second. D: prefer to move first.

D: prefer to move first.