Module 4 Game Theory Review

When looking at a payoff matrix, both companies make some money because...

• they are in an oligopoly

• brand loyalty

• some people switch their preferences depending on sale prices

• all of the above

What characteristic of oligopolies makes game theory a useful tool to make predictions?

• interdependence and strategic interactions

• a single seller

• slightly differentiated products

• the ability to engage in price discrimination

If the market for cheese sandwiches is an oligopoly, which of the following would we expect to see?

• price lower than marginal cost

• no barriers to entry

• constant consideration of the other firm in the oligopoly's prices

• allocative efficiency in the short run

The game below shows the payoffs associated with the strategies of 2 players. Assume that the objective of each player is to earn the largest payoff. Which of the following is true?

• Neither Asil nor Joseph have a dominant strategy

• Asil has a dominant strategy, Joseph does not

• Joseph has a dominant Strategy, Asil does not

• Both Asil and Joseph have a dominant strategy

Does BREADBASKET have a dominant strategy to go low, go high, or no dominant strategy?

• Low

• High

• No Dominant Strategy

Does QUICKLUNCH have a dominant strategy to go low, go high, or no dominant strategy?

• Low

• High

• No Dominant Strategy

If the two shops do not cooperate on setting prices, what will be the dominant strategy for BREADBASKET?

• $105

• $40

• $120

If the two shops do not cooperate on setting prices, what will be the dominant strategy for QUICKLUNCH?

• $110

• $80

• $70

At what point is Nash Equilibrium? (HINT 1: Neither player can increase her payoff by choosing an action different from her current one) (HINT 2: remember who has the dominant strategy and who does not!)

• $105, $110

• $120, $80

• $75, $70

Which of the following is most associated with price leadership, collusion, and cartels?

• Monopoly

• Monopolistic

• Oligopoly

• Perfect