Question 1

A game in which joint action is favoured is called a:&#10;A)zero-sum game.&#10;B)cooperative game.&#10;C)positive-sum game.&#10;D)negative-sum game.

Accepted Answer

A cooperative game is one in which joint action is rewarded, and players are encouraged to work together to achieve a common goal. The other options (A, C, D) are all situations in which there is a conflict of interest between players, and one person's gain is another person's loss. A cooperative game is a game in which joint action is favored, and participants can achieve mutual benefit by working together. Zero-sum games are played with the objective of one player gaining at the expense of the other. Positive-sum games are those in which all players can benefit, while negative-sum games are those in which all players can lose.

Question 2

In a simultaneous-move game, each player:&#10;A)is aware of all prior moves.&#10;B)need not understand the benefits from revealing useful information.&#10;C)adopts the look ahead and extrapolate back principle.&#10;D)moves without any direct knowledge of moves made by other players.

Accepted Answer

In a simultaneous-move game, players move without any direct knowledge of moves made by other players. This is what defines a simultaneous-move game. The other options may apply to other types of games, but are not relevant to this type of game. In a simultaneous-move game, players make their moves without any direct knowledge of the moves made by other players. Therefore, choice D is the best answer. The other choices are not accurate descriptions of simultaneous-move games. For example, in choice A, players are not aware of all prior moves made by other players, as these moves occur simultaneously. Similarly, choices B and C do not accurately describe the nature of simultaneous-move games.

Question 3

The so-called Prisoner's Dilemma:&#10;A)is a one-shot game with ongoing interaction between competitors.&#10;B)is a repeated game.&#10;C)has no dominant strategy.&#10;D)exists because both would be better off if they could be assured that the other would confess.

Accepted Answer

The Prisoner's Dilemma has no dominant strategy, meaning that there is no single best move for both players regardless of the other player's move. Instead, the best strategy depends on the other player's move and the payoffs associated with different outcomes.

Question 4

A system of behaviour that remains the same until another player takes some course of action that precipitates a different response is:&#10;A)a finitely repeated game with known duration.&#10;B)a finitely repeated game of unknown duration.&#10;C)an infinitely repeated game.&#10;D)a trigger strategy.

Accepted Answer

This is the definition of a trigger strategy, where a player's behaviour remains the same until a specific trigger or action by another player triggers a different response. Finitely repeated games have a known duration, while infinitely repeated games do not necessarily involve trigger strategies. This system of behaviour described is known as a trigger strategy, where a player's action triggers a change in the other player's behaviour. The other options given, such as finitely repeated games and infinitely repeated games, refer to different types of games rather than specific strategies within a game.

Question 5

A secure strategy guarantees:&#10;A)the best result regardless of the actions taken by other players.&#10;B)the best possible outcome given the worst possible scenario.&#10;C)that no player can improve their own payoff by unilaterally changing their own strategy.&#10;D)that rivals will not be able to predict strategic moves.

Accepted Answer

A secure strategy is designed to ensure the best possible outcome in the worst-case scenario, often used in game theory to minimize potential losses.

Question 6

The desirability of maintaining a reputation for selling high-quality goods and services is minimal in the case of:&#10;A)a finitely repeated game with known duration.&#10;B)a finitely repeated game of unknown duration.&#10;C)an infinitely repeated game.&#10;D)none of these.

Accepted Answer

In a finitely repeated game with known duration, there is a limited number of interactions between the buyer and seller. The seller may prioritize short-term profit over maintaining a good reputation for quality, since there won't be many repeated interactions with the same buyer. In a finitely repeated game with known duration, the players only interact a limited number of times and do not have the opportunity to establish a long-term relationship. Therefore, the desirability of maintaining a reputation for selling high-quality goods and services is minimal in this case.

Question 7

A unique ability to create, distribute, or service products valued by customers is called:&#10;A)a first-mover advantage.&#10;B)a competitive advantage.&#10;C)a comparative advantage.&#10;D)economy of scale.

Accepted Answer

A competitive advantage refers to a company's ability to outperform competitors in terms of creating, distributing, or servicing products that are highly valued by customers. This advantage could come from a variety of factors such as unique technologies, efficient production processes, strong brand recognition, or superior customer service. Having a competitive advantage can help a company to attract and retain customers, increase sales, and ultimately generate higher profits. A competitive advantage is a unique ability that allows a company to outperform its competitors. This could be through creating, distributing, or servicing products that are highly valued by customers. It is what sets a company apart in the marketplace and allows it to succeed.

Question 8

Market penetration pricing by newcomers is apt to be most successful when:&#10;A)network externalities lead to significant first-mover advantages.&#10;B)established and thriving firms enjoy customer lock-in effects.&#10;C)aggressive predatory pricing strategies are necessary to limit competitor entry.&#10;D)applied in competitive markets.

Accepted Answer

Market penetration pricing is most successful when there are network externalities that lead to significant first-mover advantages. This is because users are more likely to choose the product with the largest network, making it difficult for competitors to enter the market. In this situation, newcomers can use market penetration pricing to quickly gain market share and establish themselves as a dominant player. Market penetration pricing by newcomers is most successful when network externalities lead to significant first-mover advantages. This is because being the first mover in a market with network effects can provide a company with a significant advantage, as early adopters of the product or service will continue to use it and even recommend it to others, creating a self-reinforcing cycle. This makes it difficult for competitors to gain a foothold in the market, allowing the new entrant to establish a strong position and pricing power.

Question 9

Game theory is a general framework to help decision making when:&#10;A)facing irrational behaviour by others.&#10;B)players are unable to anticipate the equilibrium calculations of other players.&#10;C)payoffs depend on actions taken by others.&#10;D)cannot be anticipated.

Accepted Answer

Game theory is particularly useful when payoffs are dependent on the actions taken by others. Game theory is used to make decisions when payoffs depend on actions taken by others. A and D are incorrect because game theory assumes rational behavior by all players, and the actions of other players can be anticipated and accounted for in the decision-making process. B is partially correct, as game theory does involve calculating equilibrium outcomes, but this is not the sole reason for using game theory in decision-making.

Question 10

A competitive strategy to set less than monopoly prices in an effort to deter entry by new competitors is called:&#10;A)market penetration pricing.&#10;B)limit pricing.&#10;C)predatory pricing.&#10;D)none of these.

Accepted Answer

Limit pricing is a competitive strategy where a firm sets its prices lower than the monopoly price, but still high enough to make it unprofitable for any new entrants to enter the market. This is done to discourage new competitors from entering the market as they would not be able to cover their costs at the lower price level. Market penetration pricing is a pricing strategy where a firm sets low prices to attract customers and gain market share. Predatory pricing is a pricing strategy where a firm sets very low prices to drive competitors out of the market, which is illegal in many countries. The strategy described in the question is known as limit pricing, which involves setting a price just low enough to make it unprofitable for new competitors to enter the market. This is different from market penetration pricing, which involves setting low prices to attract new customers, and predatory pricing, which involves setting prices low with the intention of driving competitors out of business.

Deck 14: Game Theory and Competitive Strategy