Chapter 6: Game Theory
Multiple Choice Questions
A common assumption about the players in a game is that
- neither player knows the payoff matrix.
- the players have different information about the payoff matrix.
- only one of the players pursues a rational strategy.
- the specific identity of the players is irrelevant to the play of the game.
In a zero-sum game,
- what one player wins, the other loses.
- the sum of each player’s winnings if the game is played many times must be zero.
- the game is fair—each person has an equal chance of winning.
- long-run profits must be zero.
The Prisoners’ Dilemma is not a constant sum game because
- some outcomes are better than others for both players.
- the prisoners’ sentences are necessarily non-zero.
- the game does not have a Nash equilibrium.
- the sum of the prisoners’ sentences in non-zero.
The twin non-confess strategy choice in the Prisoners’ Dilemma can be described as
- non-Pareto optimal and unstable.
- Pareto optimal and unstable.
- non-Pareto optimal and stable.
- Pareto optimal and stable.
The Nash equilibrium in a Bertrand game of price setting where all firms have the same marginal cost is
- efficient because all mutually beneficial transactions will occur.
- efficient because of the free entry assumption.
- inefficient because some mutually beneficial transactions will be foregone.
- inefficient because of the uncertainties inherent in the game.
The Nash equilibrium is a Bertrand game of price setting where firms have different marginal cost is
- efficient because all mutually beneficial transactions will occur.
- efficient because of the free entry assumption.
- inefficient because some mutually beneficial transactions will be foregone.
- inefficient because of the uncertainties inherent in the game.
The Nash equilibrium in a Bertrand price setting game in which firms first choose output capacities resembles the equilibrium in
- the competitive model.
- the Cournot model.
- the cartel model.
- the price leadership model.
A price leader in the Stackelberg model is assumed to know
- the market demand curve.
- its own cost function.
- its rival’s reaction function.
- all of the above.
A subgame perfect equilibrium is a Nash equilibrium that
- cannot persist through several periods.
- involves only credible threats.
- consists only of dominant strategies.
- is unique.
A cartel-like collusive solution can be a Nash equilibrium only in games with
- infinite replications.
- finite replications.
- dominant strategies.
- more than two players.