Quiz 13: Game Theory and Competitive Strategy

Which of the following conditions,if present,is sufficient to make a game cooperative? A)Individual payoffs are greater if all players choose the same strategy. B)Players can communicate with each other. C)Players can negotiate binding contracts committing them to particular strategies. D)Players must agree unanimously on any set of strategies. E)The payoff that is highest for all individuals together is also highest for each individual player.

You are playing a game in which a dollar bill is auctioned.The highest bidder receives the dollar in return for the amount bid.However,the second-highest bidder must pay the amount that he or she bids,and gets nothing in return.The optimal strategy is: A)to bid the smallest allowable increment below $1. B)to bid nothing. C)to bid $0.99. D)to bid more than a dollar.

Which of the following are examples of cooperative games? A)The bargaining between a buyer and seller over the price of a car B)Independent action by two firms in a market regarding advertising strategies C)Independent pricing strategies by two firms in a market D)Independent pricing strategies by many firms in a market E)Team games (such as baseball or basketball)

In the spring of 1994,Northwest Airlines took the independent action of reducing fares on its flights.Other competing airlines quickly matched the fare cuts.These actions might be interpreted as: A)a noncooperative game. B)a cooperative game. C)a constant sum game. D)a competitive game.

Which of the following statements represents a key point about strategic decision making? A)Strategy is less important in nonconstant sum games than in constant sum games. B)The payoffs in cooperative games will always be higher than in noncooperative games. C)It is essential to understand your opponent's point of view and to deduce his or her likely responses to your actions. D)Optimal strategies in cooperative games always lead to economically efficient outcomes.

Use the following statements to answer the question: I.Consider the problem of negotiating the price of a rug that costs $100 to make.If there are two buyers (one with a maximum willingness-to-pay of $200 and one with a maximum willingness-to-pay of $250),then the situation is no longer a constant sum game. II)The likely outcome from the game described in statement I is that the second buyer will bid a price slightly above $200 to win the rug. A)I and II are true. B)I is true and II is false. C)II is true and I is false. D)I and II are false.

A dominant strategy can best be described as A)a strategy taken by a dominant firm. B)the strategy taken by a firm in order to dominate its rivals. C)a strategy that is optimal for a player no matter what an opponent does. D)a strategy that leaves every player in a game better off. E)all of the above

Your economics professor has decided that your class will not be graded on a curve but on an absolute scale.Therefore,it is possible for every student in the class to get an "A." Your grade will not depend in any way on your classmates' performance.Based on this information,you decide that you should study economics three hours each day,regardless of what your classmates do.In the language of game theory,your decision to study three hours each day is: A)a dominant strategy. B)a minimax strategy. C)a maximin strategy. D)a Prisoner's dilemma.

A strategy A is "dominant" for a player X if A)strategy A contains among its outcomes the highest possible payoff in the game. B)irrespective of any of the possible strategies chosen by the other players,strategy A generates a higher payoff than any other strategy available to player X. C)strategy A is the best response to every strategy of the other player. D)strategy A is the best response to the best strategy of the other player. E)every outcome under strategy A generates positive payoffs.

Scenario 13.2: -Which of the following is true about the game in Scenario 13.2? A)ABC's dominant strategy is to offer a rebate. B)ABC's dominant strategy is not offer a rebate. C)XYZ's dominant strategy is to offer a rebate. D)XYZ's dominant strategy is not offer a rebate. E)Both ABC and XYZ have offer a rebate as a dominant strategy.

Scenario 13.2: -In the game in Scenario 13.2,the equilibrium strategies A)are for both firms to offer rebates. B)is for ABC to offer a rebate,and XYZ not to offer a rebate. C)is for XYZ to offer a rebate,and ABC not to offer a rebate. D)are for both firms to offer no rebate. E)does not exist in pure strategies.

Scenario 13.3 Consider the following game: -Which of the following is true for the game in Scenario 13.3? A)Moto's dominant strategy is the CD changer. B)Moto's dominant strategy is the free maintenance. C)Zport's dominant strategy is the low-profile tires. D)Zport's dominant strategy is the sun roof. E)Neither company has a dominant strategy.

Scenario 13.3 Consider the following game: -In the game in Scenario 13.3,the equilibrium outcome: A)is for Moto to offer a CD changer and Zport to offer low-profile tires. B)is for Moto to offer a CD changer and Zport to offer a sun roof. C)is for Moto to offer free maintenance and Zport to offer low-profile tires. D)is for Moto to offer free maintenance and Zport to offer a sunroof. E)does not exist in pure strategies.

Scenario 13.4 Consider the following game: -Which of the following is TRUE for the game in Scenario 13.4? A)NRG's dominant strategy is to sponsor the marathon. B)NRG's dominant strategy is to sponsor the TV show. C)Vita's dominant strategy is to sponsor the marathon. D)Vita's dominant strategy is to sponsor the TV show. E)Neither company has a dominant strategy.

Scenario 13.4 Consider the following game: -In the game in Scenario 13.4,the equilibrium outcome: A)is for both NRG and Vita to sponsor the marathon. B)is for both NRG and Vita to sponsor the TV show. C)is for NRG to sponsor the marathon and Vita to sponsor the TV show. D)is for NRG to sponsor the TV show and Vita to sponsor the marathon. E)does not exist in pure strategies.

Scenario 13.5 Consider the following game: -Which of the following is true regarding the game in Scenario 13.5? A)Only Bull Meat has a dominant strategy. B)Only Deer Meat has a dominant strategy. C)Both companies have a dominant strategy: expand West. D)Both companies have a dominant strategy: expand South. E)Neither company has a dominant strategy.

Scenario 13.5 Consider the following game: -In the game in Scenario 13.5, A)there is one equilibrium: for both to expand West. B)there is one equilibrium: for both to expand South. C)there are two equilibria: either can expand in the West,and the other expands in the South. D)there is only a mixed strategies equilibrium. E)all four outcomes are equilibria.

If both players in a game have dominant strategies,we say that the game has: A)a constant sum. B)a nonconstant sum. C)independence of irrelevant alternatives. D)an equilibrium in dominant strategies.

Use the following statements to answer this question: I.A player must have at least one dominant strategy in a game. II)If neither player in a game has a dominant strategy in a game,then there is no equilibrium outcome for the game. A)I and II are true. B)I is true and II is false. C)II is true and I is false. D)I and II are false.

Consider the following game in which two firms decide how much of a homogeneous good to produce.The annual profit payoffs for each firm are stated in the cell of the game matrix,and Firm A's payoffs appear first in the payoff pairs: What are the dominant strategies in this game? A)Both firms producer low levels of output B)Both firms produce high levels of output C)Firm A's dominant strategy is to produce low levels of output,but Firm B does not have a dominant strategy. D)Firm B's dominant strategy is to produce low levels of output,but Firm A does not have a dominant strategy. E)Neither firm has a dominant strategy

A Nash equilibrium occurs when A)each firm is doing the best it can given its opponents' actions. B)each firm chooses the strategy that maximizes its minimum gain. C)a player can choose a strategy that is optimal regardless of its rivals' actions. D)there is no dominant firm in a market.

A maximin strategy A)maximizes the minimum gain that can be earned. B)maximizes the gain of one player,but minimizes the gain of the opponent. C)minimizes the maximum gain that can be earned. D)involves a random choice between two strategies,one which maximizes potential gain and one which minimizes potential loss.

Andre Agassi,a star tennis player,is playing the number one player in the world,Roger Federer.Before the match,Agassi decided that he would serve 20 percent of his serves to Federer's backhand,30 percent of his serves to Federer's forehand,and 50 percent of his serves straight at Federer.In the language of game theory,this is known as: A)a pure strategy. B)a dominant strategy. C)a mixed strategy. D)a maximin strategy.

Use the following statements to answer this question: I.If mixed strategies are allowed,every game has at least one Nash equilibrium. II)The maximin strategy is optimal in the game of "matching pennies." A)Both I and II are true. B)I is true,and II is false. C)I is false,and II is true. D)Both I and II are false.

In a Nash equilibrium, A)each player has a dominant strategy. B)no players have a dominant strategy. C)at least one player has a dominant strategy. D)players may or may not have dominant strategies. E)the player with the dominant strategy will win.

Nash equilibria are stable because A)they involve dominant strategies. B)they involve constant-sum games. C)they occur in noncooperative games. D)once the strategies are chosen,no players have an incentive to negotiate jointly to change them. E)once the strategies are chosen,no player has an incentive to deviate unilaterally from them.

The relationship between a pure-strategy Nash equilibrium and a dominant-strategy equilibrium is that A)a dominant-strategy equilibrium is a special case of a pure-strategy Nash equilibrium. B)a pure-strategy Nash equilibrium is a special case of a dominant-strategy equilibrium. C)they are the same. D)there may not be a dominant-strategy equilibrium,but there always is a pure-strategy Nash equilibrium. E)they are mutually exclusive and exhaustive,in that a dominant-strategy equilibrium is the same thing as a mixed-strategy Nash equilibrium.

Scenario 13.6 Consider the following game: Payoffs are in millions of dollars. -In the game in Scenario 13.6, A)"Poison Pill" is a dominant strategy for Lawrence LLP. B)"Dump" is a dominant strategy for Lawrence LLP. C)"TurboTech" is a dominant strategy for ERS Co. D)"ZamboniTech" is a dominant strategy for ERS Co. E)No firm has a dominant strategy.

Scenario 13.6 Consider the following game: Payoffs are in millions of dollars. -In the game in Scenario 13.6,what is the Nash equilibrium? A)The strategy pair associated with -$100,-$1. B)The strategy pair associated with $2,-$0.5. C)The strategy pair associated with $1,-$1. D)The strategy pair associated with -$0.5,-$0.5. E)There is no Nash equilibrium in pure strategies.

Scenario 13.6 Consider the following game: Payoffs are in millions of dollars. -Refer to the game in Scenario 13.6.What will occur if ERS Co.plays a maximin strategy? A)-$100,-$1 B)$2,-$0.5 C)$1,-$1 D)-$0.5,-$0.5 E)There is a 0.25 chance of each outcome in that case.

Scenario 13.7: Consider the game below about funding and construction of a dam to protect a 1,000-person town.Contributions to the Dam Fund,once made,cannot be recovered,and all citizens must contribute $1,000 to the dam in order for it to be built.The dam,if built,is worth $70,000 to each citizen. -In the game in Scenario 13.7,the strategy pair that pays A)$69,000 to each player is the only equilibrium. B)($0,-$1000)is the only equilibrium. C)(-$1000,$0)is the only equilibrium. D)$0 to each player is the only equilibrium. E)$69,000 to each player and the strategy pair that pays $0 to each player are equilibria.

Scenario 13.7: Consider the game below about funding and construction of a dam to protect a 1,000-person town.Contributions to the Dam Fund,once made,cannot be recovered,and all citizens must contribute $1,000 to the dam in order for it to be built.The dam,if built,is worth $70,000 to each citizen. -Refer to the game in Scenario 13.7.If each player chose a maximin strategy,the outcome would be A)$69,000,$69,000. B)$0,-$1000. C)-$1000,$0. D)$0,$0. E)a mixed strategy equilibrium.

Scenario 13.8 Consider the following game: -The game in Scenario 13.8 is A)variable-sum. B)constant-sum. C)cooperative. D)a Prisoner's Dilemma. E)a Conjoint Crux.

Scenario 13.8 Consider the following game: -In game in Scenario 13.8, A)Y is a dominant strategy for IVY Corp. B)Z is a dominant strategy for IVY Corp. C)A is a dominant strategy for SAC Group. D)B is a dominant strategy for SAC Group. E)No firm has a dominant strategy.

Scenario 13.8 Consider the following game: -In game in Scenario 13.8,what is the Nash equilibrium? A)The strategy pair associated with $1,$10. B)The strategy pair associated with $2,$0. C)The strategy pair associated with $1,-$5000. D)The strategy pair associated with $2,$2. E)There is no Nash equilibrium in pure strategies.

Scenario 13.8 Consider the following game: -In game in Scenario 13.8,what will occur if IVY Corp.plays a maximin strategy? A)$1,$10 B)$1,-$5000 C)$2,$0 D)$2,$2 E)There is a .25 chance of each outcome in that case.

Scenario 13.9 Consider the following game: Two firms are situated next to a lake,and it costs each firm $1,500 per period to use filters that avoid polluting the lake.However,each firm must use the lake's water in production,so it is also costly to have a polluted lake.The cost to each firm of dealing with water from a polluted lake is $1,000 times the number of polluting firms. -What is true about dominant strategies in the game in Scenario 13.9? A)"Pollute" is a dominant strategy for both firms. B)"Pollute" is a dominant strategy for Lago only. C)"Don't Pollute" is a dominant strategy for both firms. D)"Don't Pollute" is a dominant strategy for Lago only. E)There are no dominant strategies.

Scenario 13.9 Consider the following game: Two firms are situated next to a lake,and it costs each firm $1,500 per period to use filters that avoid polluting the lake.However,each firm must use the lake's water in production,so it is also costly to have a polluted lake.The cost to each firm of dealing with water from a polluted lake is $1,000 times the number of polluting firms. -Refer to Scenario 13.9.What kind of game is being played by Lago and Nessie? A)Battle of the Sexes. B)Prisoner's Dilemma. C)Beach Location. D)Stackelberg Output Choice. E)Cournot Output Choice.

Scenario 13.9 Consider the following game: Two firms are situated next to a lake,and it costs each firm $1,500 per period to use filters that avoid polluting the lake.However,each firm must use the lake's water in production,so it is also costly to have a polluted lake.The cost to each firm of dealing with water from a polluted lake is $1,000 times the number of polluting firms. -Refer to Scenario 13.9.The equilibrium of this game,if played only once,is that A)both firms pollute. B)only Lago pollutes. C)only Nessie pollutes. D)neither firm pollutes. E)the firms choose a mixed strategy.

Scenario 13.9 Consider the following game: Two firms are situated next to a lake,and it costs each firm $1,500 per period to use filters that avoid polluting the lake.However,each firm must use the lake's water in production,so it is also costly to have a polluted lake.The cost to each firm of dealing with water from a polluted lake is $1,000 times the number of polluting firms. -Refer to Scenario 13.9.If this game is repeated over an infinite or uncertain horizon,the most likely observed behavior will be that A)both firms pollute. B)only Lago pollutes. C)only Nessie pollutes. D)neither firm pollutes. E)the firms alternate polluting in different periods.

Scenario 13.9 Consider the following game: Two firms are situated next to a lake,and it costs each firm $1,500 per period to use filters that avoid polluting the lake.However,each firm must use the lake's water in production,so it is also costly to have a polluted lake.The cost to each firm of dealing with water from a polluted lake is $1,000 times the number of polluting firms. -A "mixed strategy" equilibrium means that A)the strategies chosen by the players represent different behaviors. B)one player has a dominant strategy,and one does not. C)one player has a pure strategy,and one does not. D)the equilibrium strategy is an assignment of probabilities to pure strategies. E)the equilibrium strategy involves alternating between a dominant strategy and a Nash strategy.

Scenario 13.10 Consider the game below: -What is true about dominant strategies in the game in Scenario 13.10? A)"Use more caffeine" and "have a sweepstakes" are dominant strategies. B)"Use more caffeine" and "create a diet soda" are dominant strategies. C)"Make animal-shaped bottles" and "have a sweepstakes" are dominant strategies. D)"Make animal-shaped bottles" and "create a diet soda" are dominant strategies. E)There are no dominant strategies.

Scenario 13.10 Consider the game below: -The game in Scenario 13.10 is A)variable-sum. B)constant-sum. C)cooperative. D)a Prisoners' Dilemma. E)a Cournot Production Cross.

Scenario 13.10 Consider the game below: -Which of the below outcomes is the result of a Nash equilibrium in pure strategies for the game in Scenario 13.10? A)-5,5 B)10,-10 C)8,-8 D)0,0 E)There is no pure strategy equilibrium in this game.

In the game in Scenario 13.10,there is A)a mixed strategy equilibrium,and no other. B)a mixed strategy and a pure strategy equilibrium. C)a mixed strategy and two pure strategy equilibria. D)a mixed strategy and four pure strategy equilibrium. E)no equilibrium in either mixed or pure strategies.

The Matching Pennies game is an example of a: A)constant-sum game. B)nonconstant sum game. C)game with an equilibrium in dominant strategies. D)none of the above

Consider the Matching Pennies game: Suppose Player B always uses a mixed strategy with probability of 3/4 for head and 1/4 for tails.Which of the following strategies for Player A provides the highest expected payoff? A)Mixed strategy with probability 1/4 on heads and 3/4 on tails B)Mixed strategy with probability 1/2 on heads and 1/2 on tails C)Mixed strategy with probability 3/4 on heads and 1/4 on tails D)Pure strategy in which Player A always selects heads

Consider the Matching Pennies game: Suppose Player A always uses a pure strategy that selects heads.What is Player B's optimal response to this pure strategy? A)Always select heads. B)Always select tails. C)Mixed strategy with probability 1/2 on heads and 1/2 on tails D)There is no optimal pure or mixed strategy for this situation.

Consider the Matching Pennies game: Suppose Player A always uses a pure strategy that selects heads,and Player B always uses a pure strategy that selects tails.Is this outcome a Nash equilibrium? A)Yes,both players have no incentive to change their actions. B)No,Player A would want to switch to tails. C)No,Player B would want to switch to heads. D)No,Player B would want to switch to tails.

Consider the Matching Pennies game: Suppose both players use maximin strategies for this game.Is there a clear equilibrium outcome to the game in this case? A)Yes,both players select heads B)Yes,both players select tails C)No,both players face the minimum payoff (-1)under both actions. D)We do not have enough information to answer this question.

A "Credible Threat" A)is also called a "tit-for-tat" strategy. B)always set a low price. C)minimizes the return of your opponent. D)is a strategy selection that is in your best interest. E)provides the best return for both players.

Repetition of a game A)yields the same outcome,over and over. B)can result in behavior that is different from what it would be if the game were played only once. C)is not possible. D)makes cooperative games into non-cooperative games. E)is possible only if the payoffs in the matrix change.

The strategy that worked best in Axelrod's experiments using the Prisoners' Dilemma game was to A)play the "cooperate" ("don't confess")strategy. B)play the "defect" ("confess")strategy. C)alternate between "cooperate" and "defect" strategies. D)play the "cooperate" strategy at first,and from then on do whatever the other player did in the previous round,cooperating if the other player did,and defecting if the other player did. E)play the "cooperate" strategy in the first round,and from then on cooperate so long as the other player does,but if the other player defects,then play the "defect" strategy from that time forward.

It can be rational to play tit-for-tat in a repeated Prisoners' Dilemma game A)only if the game is played an infinite number of times. B)if the game is played an infinite number of times,or if it is uncertain how many times it will be played. C)only if the game is played a finite number of times,and that number is known by all the players in advance. D)for n-1 of the n periods it will be played,if n is known in advance. E)at no time; tit-for-tat is an irrational strategy in this situation.

Scenario 13.11 Consider the game below: -What is true about dominant strategies in the game in Scenario 13.11? A)R1 and C1 are dominant strategies. B)R1 and C2 are dominant strategies. C)R2 and C1 are dominant strategies. D)R2 and C2 are dominant strategies. E)There are no dominant strategies.

Scenario 13.11 Consider the game below: -What kind of game is shown in Scenario 13.11? A)Axelrod's Paradox B)Stackelberg Match C)Prisoners' Dilemma D)Cournot's Duopoly Game E)It is not possible to tell what kind of game it is because the strategies have not been identified.

In the game in Scenario 13.11,equilibrium is A)R1,C1. B)R1,C2. C)R2,C1. D)R2,C2. E)a mixed strategy based on all four pure strategies.

When cost and demand are stable over time in an industry,repetition of Prisoners' Dilemma situations A)can yield cooperative outcomes because firms can explicitly collude to set prices. B)can yield cooperative outcomes even when firms do not explicitly collude to set prices. C)cooperative or noncooperative outcomes may occur,but cooperation is harder than when the market is unstable. D)will tend to yield noncooperative outcomes. E)will always yield noncooperative outcomes.

For infinitely repeated games in which the players follow a tit-for-tat strategy,which one of the following outcomes is NOT possible? A)The players cooperate with one another until someone decides to not cooperate,and then the other players will not cooperate for some period of time. B)There can be dominant strategies. C)If the information about another player's action is limited,then some cooperative actions may be incorrectly interpretted as "not cooperate." D)All of the above are possible outcomes.

Once the state environmental protection agency devises its new policy to protect the environment,firms decide whether to remain in the state or move their operations to a neighboring state.In the language of game theory,this is an example of: A)a cooperative game. B)a sequential game. C)a threat. D)the Prisoner's dilemma.

A "sequential game" is A)another term for a repeated game. B)another term for a cooperative game. C)the term for a game in which individuals receive their payoffs at different times. D)the term for a game in which individuals do not commit to strategy choices at the same time. E)the term for a game in which each outcome occurs,one after the other,as the game is repeated over time.

In the sequential version of a game using the same players,the same strategies,and the same possible outcomes as the original game,the equilibrium A)may be different than in the original game. B)must be different than in the original game. C)will be the same as in the original game. D)is the same as the cooperative version of the original game. E)is the same as the noncooperative version of the original game.

An oligopolistic situation involving the possible creation of barriers to entry would probably best be modeled by a A)cooperative game. B)Prisoners' Dilemma game. C)Battle of the Sexes game. D)repeated game. E)sequential game.

What does it mean to say that a game is in "extensive form"? A)Strategies are described,rather than just numbered. B)All payoffs are shown. C)The game is presented as a matrix. D)The game is presented as a decision tree. E)The game is written out as often as the situation calls for it to be played.

Scenario 13.12 Consider the game below: -Playing the game in Scenario 13.12 sequentially would A)not change the equilibrium. B)change the equilibrium to (R1,C1). C)change the equilibrium to (R2,C1)if R moved first. D)change the equilibrium to (R2,C1)if C moved first. E)change the equilibrium to (R2,C2).

Scenario 13.12 Consider the game below: -Playing the game in Scenario 13.12 by using a maximin strategy would A)not change the equilibrium from the equilibrium of the original game. B)change the equilibrium to (R1,C2). C)change the equilibrium to (R2,C1)if R moved first. D)change the equilibrium to (R2,C1)if C moved first. E)change the equilibrium to (R2,C2).

Scenario 13.12 Consider the game below: -If the Battle of the Sexes game were played sequentially, A)one of the two pure strategy equilibria would become the only equilibrium. B)the two pure strategy equilibria would alternate in being the equilibrium seen in each round of the game. C)only the mixed strategy equilibrium would exist. D)only the dominant strategy equilibrium would exist. E)the equilibrium would not change.

Scenario 13.13 Consider the game below: -If the game in Scenario 13.13 were not played sequentially, A)the only equilibrium would be (R2,C1). B)the only equilibrium would be (R1,C2). C)the only equilibria would be (R2,C1)and (R1,C2). D)the only equilibria would be (R2,C1),(R1,C2)and a mixed strategy equilibrium. E)there would not be any equilibrium.

Playing the game in Scenario 13.13 sequentially would A)not change the equilibrium. B)change the equilibrium to (R1,C1). C)change the equilibrium to (R2,C1)if R moved first. D)change the equilibrium to (R2,C1)if C moved first. E)change the equilibrium to (R2,C2).

What kind of game is shown in Scenario 13.13? A)Battle of the Sexes. B)Matching Pennies. C)Prisoners' Dilemma. D)The Product Choice game. E)It is not possible to tell what kind of game it is because the strategies have not been identified.

Which is true of output-choice models of oligopoly behavior? A)Both the Stackelberg and Cournot models can be constructed as sequential games. B)The Stackelberg,but not the Cournot,model can be constructed as a sequential game. C)The Cournot,but not the Stackelberg,model can be constructed as a sequential game. D)Neither the Cournot nor the Stackelberg model can be constructed as a sequential game,but other output-choice models can be. E)There is no relationship between any output-choice model and sequential games.

Scenario 13.14 Consider the game below: -The game in Scenario 13.14 A)is Stackelberg if both players move at the same time; Cournot if one player moves first. B)is Cournot if both players move at the same time; Stackelberg if one player moves first. C)Stackelberg no matter what the timing of moves. D)Cournot no matter what the timing of moves. E)is neither Stackelberg nor Cournot.

Scenario 13.14 Consider the game below: -In the game in Scenario 13.14, A)R's dominant strategy is Q = 100; C has none. B)C's dominant strategy is Q = 100; R has none. C)Q = 100 is a dominant strategy for both R and C. D)Q = 100 dominates Q =150 for both firms. E)the dominant strategy for both players is to choose the same level of output,so long as it is not 150.

Scenario 13.14 Consider the game below: -What is true of equilibrium in the game in Scenario 13.14? A)In equilibrium,both firms choose Q = 50. B)In equilibrium,both firms choose Q = 100. C)There are two equilibria,at Q = 50 and at Q = 100. D)The only equilibrium is in mixed strategies. E)The two equilibria are those associated with the (40,30)outcome and the (30,40)outcome.

In the game in Scenario 13.14,each firm has a strategy that would not be chosen under any circumstances.This strategy is A)Q = 50. B)Q = 100. C)Q = 150. D)"choose the same Q as the other player." E)"choose a Q different from the other player's."

When,in the game in Scenario 13.14,the strategy that would not be chosen under any circumstances is removed,what is left is a A)Battle of the Sexes game. B)Matching Pennies game. C)Prisoners' Dilemma game. D)Beach Location game. E)constant-sum game.

If,in the game in Scenario 13.14,R moves first,it will select A)Q = 50. B)Q = 100. C)Q = 150. D)a mixed strategy over the three choices that includes some positive likelihood for each Q. E)a mixed strategy over the choices Q = 50 and Q = 100.

If,in the game in Scenario 13.14,R moves first,C will respond with A)Q = 50. B)Q = 100. C)Q = 150. D)a mixed strategy over the three choices that includes some positive likelihood for each Q. E)a mixed strategy over the choices Q = 50 and Q = 100.

Relative to a simultaneous-move situation,the gain to firm R from being able to move first in the game in Scenario 13.14,would be A)40. B)37. C)32. D)5) E)3)

Relative to a simultaneous-move situation,the loss to firm C from having to move second in the game in Scenario 13.14,would be A)37. B)20. C)12. D)8) E)5)

If player R moves first in the game in Scenario 13.14,the equilibrium will A)not be different from what it is in the simultaneous-move scenario. B)be to R's detriment because it will not be able to react to C's choice. C)be one in which R chooses 50 and C chooses 150. D)be one in which R chooses 100 and C chooses 50. E)be one in which R chooses 150 and C chooses 50.

Consider the following game that represents the payoffs from different advertising campaigns (low,medium,and high spending)for two political candidates that are running for a particular office.The values in the payoff matrix represent the share of the popular vote earned by each candidate: Under the version of the game with simultaneous moves,what is the Nash equilibrium? A)Neither candidate has a dominant strategy,but the Nash equilibrium occurs where both candidates use medium advertising campaigns. B)Candidate A's dominant strategy is high,Candidate B's dominant strategy is high,and this is the Nash equilibrium. C)Neither candidate has a dominant strategy,but the Nash equilibrium occurs where both candidates use high advertising campaigns. D)There is no Nash equilibrium (in pure strategies)for this simultaneous game.

Consider the following game that represents the payoffs from different advertising campaigns (low,medium,and high spending)for two political candidates that are running for a particular office.The values in the payoff matrix represent the share of the popular vote earned by each candidate: Under the version of the game in which Candidate A moves first,what is the Nash equilibrium? A)The Nash equilibrium occurs where both candidates use medium advertising campaigns. B)Candidate A's strategy is low,and Candidate B responsed with a high advertising campaign. C)The Nash equilibrium for the sequential and simultaneous versions of the game are identical. D)There is no Nash equilibrium (in pure strategies)for this sequential game.

Wal-Mart was one of the most successful firms of the 1970s and 1980s.Much of Wal-Mart's success can be credited to its expansion strategy: they rushed to open the first discount store in small towns that could only support one discount store.In the language of game theory: A)Wal-Mart was a dominant firm. B)Wal-Mart made empty threats. C)Wal-Mart employed a maximin strategy. D)Wal-Mart employed a preemptive strategy.

As defined by Thomas Schelling,a "strategic move" is A)any strategy choice in a game. B)any strategy choice consistent with Nash equilibrium. C)any strategy choice in a sequential game. D)a strategy choice that influences the subsequent strategy choice of another player. E)a strategy choice that restricts the set of outcomes available to another player.

Scenario 13.15 Consider the pricing game below: -Which is true about dominant strategies in the game in Scenario 13.15? A)$80 is dominant for Simple; $70 is dominant for Boring. B)$80 is dominant for Simple; $25 is dominant for Boring. C)$35 is dominant for Simple; $70 is dominant for Boring. D)$35 is dominant for Simple; $25 is dominant for Boring. E)There are no dominant strategies in the above game.

Scenario 13.15 Consider the pricing game below: -Refer to Scenario 13.15.If the firms price simultaneously,equilibrium would be A)an $80 price for Simple and a $70 price for Boring. B)an $80 price for Simple and a $25 price for Boring. C)a $35 price for Simple and a $70 price for Boring. D)a $35 price for Simple and a $25 price for Boring. E)a mixed strategy equilibrium.

Scenario 13.15 Consider the pricing game below: -If Simple were able to move first in a sequential version of the game in Scenario 13.15,the equilibrium would be A)an $80 price for Simple and a $70 price for Boring. B)an $80 price for Simple and a $25 price for Boring. C)a $35 price for Simple and a $70 price for Boring. D)a $35 price for Simple and a $25 price for Boring. E)a mixed strategy equilibrium.

Scenario 13.15 Consider the pricing game below: -If Boring were able to move first in a sequential version of the game in Scenario 13.15,the equilibrium would be A)an $80 price for Simple and a $70 price for Boring. B)an $80 price for Simple and a $25 price for Boring. C)a $35 price for Simple and a $70 price for Boring. D)a $35 price for Simple and a $25 price for Boring. E)a mixed strategy equilibrium.

Scenario 13.15 Consider the pricing game below: -What is true about threats in the game in Scenario 13.15? A)Simple can change the equilibrium by means of a credible threat; Boring cannot. B)Boring can change the equilibrium by means of a credible threat; Simple cannot. C)Boring can change the equilibrium by means of a credible threat only if it can move before Simple. D)Simple can change the equilibrium by means of a credible threat only if it can move before Boring. E)Neither firm has a credible threat with which to change this equilibrium.

Scenario 13.16 Consider the pricing game below: -What is true about dominant strategies in the game in Scenario 13.16? A)Gelato is a dominant strategy for both firms. B)Yogurt is a dominant strategy for Gooi only. C)Yogurt is a dominant strategy for Ici only. D)Yogurt is a dominant strategy for both firms. E)There are no dominant strategies in the above game.

Scenario 13.16 Consider the pricing game below: -Refer to Scenario 13.16.If the firms must choose their prices simultaneously, A)both firms will buy gelato. B)both firms will buy yogurt. C)two pure strategy equilibria exist,one in which Gooi alone buys a gelato machine and one in which Ici alone buys a gelato machine. D)the game has no pure strategy equilibrium. E)the game has no mixed strategy equilibrium.

Scenario 13.16 Consider the pricing game below: -Refer to Scenario 13.16.If Gooi moves first,the payoff in equilibrium will be A)$150,$0. B)$150,$300. C)$400,$150. D)$50,$50. E)$650,$450.

Scenario 13.16 Consider the pricing game below: -Refer to Scenario 13.16.If Gooi can move first,and Ici threatens to buy yogurt machines,no matter what Gooi does, A)Gooi will have to buy gelato machines,so Ici will get its highest possible profit. B)Gooi will buy yogurt machines,which it otherwise wouldn't have,in order to retaliate. C)the equilibrium payoff of ($50,$50)will be enforced. D)Gooi will not change its behavior,because Ici's threat is not credible. E)Gooi will threaten to buy yogurt machines,no matter what Ici does,to see whether that will get the people at Ici to change their minds.

Scenario 13.16 Consider the pricing game below: -Refer to Scenario 13.16.If Gooi can move first,and Ici wants to realize the ($150,$300)payoff, A)all it has to do is threaten to buy yogurt machines,no matter what Gooi does. B)it could make its threat credible by rearranging its physical plant so that the installation of gelato machines would bring in profit less than $50. C)it could make its threat credible by rearranging its physical plant so that the installation of gelato machines would bring in profit less than $150. D)it could make its threat credible by rearranging its physical plant so that the installation of gelato machines would bring in profit less than $300. E)it has to move before Gooi; there is no other way.

Scenario 13.16 Consider the pricing game below: -To deter a potential entrant,an existing firm in a market may threaten to sharply increase production so that the entrant will be left with a small share of the market.This may be a credible threat if: A)production exhibits economies of scale. B)production exhibits diseconomies of scale. C)production costs may fall due to learning-by-doing. D)A and C are correct. E)B and C are correct.

Scenario 13.16 Consider the pricing game below: -To deter a potential entrant,an existing firm in a market may threaten to sharply increase production so that the entrant will be left with a small share of the market.The firm can make this threat credible by limiting its own options,and possible actions of this type include: A)signing long-term sales contracts that commit the firm to high levels of output. B)building a very large factory that could potentially produce enough output to meet most of the market demand. C)signing long-term purchase contracts for large amounts of production inputs. D)all of the above

Scenario 13.16 Consider the pricing game below: -La Tortilla is the only producer of tortillas in Santa Teresa.The firm produces 10,000 tortillas each day and has the capacity to increase production to 100,000 tortillas each day.La Tortilla has made a large profit for years,but no other firm has chosen to compete in the Santa Teresa tortilla market.La Tortilla has been able to deter entry because if other firms were to enter the market it would greatly step-up production and reduce price. A)La Tortilla's behavior is inconsistent with economic theory. B)La Tortilla has been successful because of its credible threat. C)La Tortilla behaves like a Stackelberg firm. D)La Tortilla must have other barriers to entry to protect its monopoly power.

Scenario 13.17 Consider the entry-deterrence game below.The potential entrant would have to spend some amount in sunk costs to enter the market. -In the game in Scenario 13.17,who moves first? A)Potential Entrant B)Incumbent Monopoly C)It's a sequential game; firms alternate moving first. D)Both players move simultaneously. E)Who moves first is decided by the equilibrium.

Scenario 13.17 Consider the entry-deterrence game below.The potential entrant would have to spend some amount in sunk costs to enter the market. -In the game in Scenario 13.17,Incumbent Monopoly has A)an incentive to threaten accommodation,which would be credible. B)an incentive to threaten war,which would be credible. C)an incentive to threaten accommodation,which wouldn't be credible. D)an incentive to threaten war,which wouldn't be credible. E)no incentive to make a threat.

Scenario 13.17 Consider the entry-deterrence game below.The potential entrant would have to spend some amount in sunk costs to enter the market. -If the game in Scenario 13.17 were to be infinitely repeated,waging a price war might be a rational strategy A)because there would be no short-term losses. B)because the short-term losses might be outweighed by long-term gains from preventing entry. C)if the potential entrant were irrational. D)if the monopolist had excess capacity. E)if there were no sunk costs to the potential entrant.

Scenario 13.17 Consider the entry-deterrence game below.The potential entrant would have to spend some amount in sunk costs to enter the market. -Refer to Scenario 13.17.If the Incumbent Monopoly installed excess capacity in advance of the Potential Entrant's appearance on the scene,and this excess capacity had a cost of $X,it would reduce by $X the Incumbent Monopoly's payoffs in the A)top row. B)bottom row. C)left column. D)right column. E)entire matrix.

The two largest auto manufacturers,Toyota and GM,have experimented with electric cars in the past,and they are currently considering the decision to introduce an electric car into the commercial automobile market.The payoffs from the possible actions are measured in millions of dollars per year,and the possible outcomes are summarized in the following game matrix: If both firms enter the market simultaneously,what is the Nash equilibrium? A)Toyota produces and GM does not produce. B)GM produces and Toyota does not produce. C)There are two Nash equilibria - GM produces and Toyota does not produce,or Toyota produces and GM does not produce. D)There is no Nash equilibrium in this game.

The two largest auto manufacturers,Toyota and GM,have experimented with electric cars in the past,and they are currently considering the decision to introduce an electric car into the commercial automobile market.The payoffs from the possible actions are measured in millions of dollars per year,and the possible outcomes are summarized in the following game matrix: Suppose the Japanese government provides a $15 million subsidy to Toyota if the company delivers an electric auto (regardless of GM's action).What is the Nash equilibrium based on the subsidized payoffs? A)Toyota's dominant strategy is to produce,and GM is deterred and does not produce. B)Toyota's dominant strategy is to produce,and GM also produces the electric auto. C)The outcome of the game is the same as before,and there are two Nash equilibria - GM produces and Toyota does not produce,or Toyota produces and GM does not produce. D)There is no Nash equilibrium in this game.

Your firm needs a private investigator and the best private eye in Santa Teresa is Kinsey Milhone.Her services are worth $30,000 to your firm but you do not want to pay her more than $10,000.You tell Kinsey that you cannot pay her more than $10,000 unless you get prior approval from the Board of Directors of your company,and,unfortunately,they just met and won't meet again for 6 months.This strategic move on your part gives you __________ flexibility and __________ bargaining power. A)less,less B)less,more C)more,less D)more,more

In a two person bargaining situation it is A)always in the best interests of both players for each player to be as flexible as possible,and to have as many options as possible. B)always in the best interest of the player that moves first to be as flexible as possible,and to have as many options as possible. C)often in the best interest of players to pretend a game is noncooperative when it is not,and vice versa. D)often in the best interest of players to cut off some of their own options in order to make the other player's threats not credible. E)often in the best interest of players to cut off some of their own options in order to make their own threats credible.

A situation in which a bidder over-values an auction item and is worse off because their bid is too high is known as the: A)Ellsberg Paradox. B)winner's curse. C)Arrow Impossibility Theorem. D)curse of the commons.

An auction in which a seller begins by offering an item for sale at a relatively high price and then reduces the price by fixed amounts until receiving a bid is known as a: A)Dutch auction. B)English auction. C)second-price auction. D)sealed-bid auction.

Use the following statements to answer this question: I.The expected revenue generated by first-price and second-price sealed-bid auctions is the same. II)The winner's curse implies that the buyer of an auctioned item will likely be the person who made the largest positive error in their estimated value of the item. A)I and II are true. B)I is true and II is false. C)II is true and I is false. D)I and II are false.

BuyRight is a chain of grocery stores operating in small cities throughout the southwestern United States.BuyRight's major competition comes from another chain,Acme Food Stores.Both firms are currently contemplating their advertising strategy for the region.The possible outcomes are illustrated by the payoff matrix below. Entries in the payoff matrix are profits.BuyRight's profit is before the comma,Acme's is after the comma. a.Describe what is meant by a dominant strategy. b.Given the payoff matrix above,does each firm have a dominant strategy? c.Under what circumstances would there be no dominant strategy for one or both firms?

Two firms at the St.Louis airport have franchises to carry passengers to and from hotels in downtown St.Louis.These two firms,Metro Limo and Urban Limo,operate nine passenger vans.These duopolists cannot compete with price,but they can compete through advertising.Their payoff matrix is below: a.Does each firm have a dominant strategy? If so,explain and what that strategy is. b.What is the Nash equilibrium? Explain where the Nash equilibrium occurs in the payoff matrix.

Consider two firms,X and Y,that produce super computers.Each can produce the next generation super computer for the military (M)or for civilian research (C).However,only one can successfully produce for both markets simultaneously.Also,if one produces M,the other might not be able to successfully produce M,because of the limited market.The following payoff matrix illustrates the problem. a.Find the Nash equilibrium,and explain why it is a Nash equilibrium. b.If Firm X were unsure that the management of Firm Y were rational,what would Firm X choose to do if it followed a maximin strategy? What would both firms do if they both followed a maximin strategy?

G.C.Donovan Company is a large pharmaceutical company located in the U.S.,but with worldwide sales.Donovan has recently developed two new medications that have been licensed for sale in European Union countries.One medication is an over-the-counter cold preparation that effectively eliminates all cold symptoms,while the other is an antibiotic that is effective against drug resistant bacteria.A European firm,Demtech Limited,has developed drugs that are similar to Donovan's and will be ready for the European market at approximately the same time.Liability concerns make it unlikely that either firm will choose to market both new drugs at this time.Both firms do plan to market one of the drugs this year. Donovan's managers consider their own lack of reputation among European physicians to be an important obstacle in the antibiotic market.Consequently,Donovan feels more comfortable marketing the cold preparation.Demtech,on the other hand,has an excellent reputation among physicians but little experience in over thecounter drugs so that Demtech's competitive advantage is with the antibiotic.Should Demtech choose to market the cold remedy,it believes that its sales will increase if Donovan also enters the cold remedy market and advertises heavily.Similarly,Donovan anticipates that its sales in the antibiotic market would be enhanced if Demtech produces antibiotics,given Demtech's excellent reputation among physicians.In short,each firm believes that there are circumstances under which participation by the other firm will complement rather than compete with the firm's own sales.Profits in millions of dollars are given in the payoff matrix below. a.Given the table above,does either firm have a dominant strategy? Is there a Nash equilibrium? (Explain the difference between a Nash equilibrium and a dominant strategy.) b.Pharmaceutical firms within the EU are attempting to organize a risk pool that would share liability risks for new drugs.Since Donovan and Demtech are among the largest pharmaceutical companies operating in Europe,the benefits of the risk pool depend upon the participation of the other firm.Increased profits achieved through reduced risk liability (measured in millions of dollars)are shown in the payoff matrix below. Does either firm have an incentive to use participation in the risk pool as a bargaining device in the drug-marketing decision? If so,what would be the nature of the bargain? How credible is the firm's bargaining position? What could be done to make the bargaining position more credible?

The widget market is controlled by two firms: Acme Widget Company and Widgetway Manufacturing.The structure of the market makes secret price cutting impossible.Each firm announces a price at the beginning of the time period and sells widgets at the price for the duration of the period.There is very little brand loyalty among widget buyers so that each firm's demand is highly elastic.Each firm's prices are thus very sensitive to inter-firm price differentials.The two firms must choose between a high and low price strategy for the coming period.Profits (measured in thousands of dollars)for the two firms under each price strategy are given in the payoff matrix below.Widgetway's profit is before the comma,Acme's is after the comma. a.Does either firm have a dominant strategy? What strategy should each firm follow? b.Assume that the game is to be played an infinite number of times.(Or,equivalently,imagine that neither firm knows for certain when rounds of the game will end,so there is always a positive chance that another round is to be played after the present one.)Would the tit-for-tat strategy would be a reasonable choice? Explain this strategy. c.Assume that the game is to be played a very large (but finite)number of times.What is the appropriate strategy if both firms are always rational?

Mitchell Electronics produces a home video game that has become very popular with children.Mitchell's managers have reason to believe that Wright Televideo Company is considering entering the market with a competing product.Mitchell must decide whether to set a high price to accommodate entry or a low,entry-deterring price.The payoff matrix below shows the profit outcome for each company under the alternative price and entry strategies.Mitchell's profit is entered before the comma,and Wright's is after the comma. a.Does Mitchell have a dominant strategy? Explain. b.Does Wright have a dominant strategy? Explain. c.Mitchell's managers have vaguely suggested a willingness to lower price in order to deter entry.Is this threat credible in light of the payoff matrix above? d.If the threat is not credible,what changes in the payoff matrix would be necessary to make the threat credible? What business strategies could Mitchell use to alter the payoff matrix so that the threat is credible?

The countries Economus and Sociolomous on planet Subjectus are engaged in a Cold War.The pay-offs of their available strategies are presented in the table below. The pay-offs are listed in terms of percentage growth in the standard of living of the two countries. Does either country have a dominant strategy? Does the game have a Nash equilibrium? What is the maximin strategy of each player in the game?

Megan and Amanda are both 7 years old and operate lemonade stands.Megan lives on the east side of Welch Avenue while Amanda resides on the west side of Welch Avenue.Each morning,the girls must decide whether to place their stand on Welch Avenue or Lincoln Avenue.When they set their stand-up,they don't know what the other will do and can't relocate.If both girls put their stand on Welch,both girls receive $175 in profits.If both girls put their stand on Lincoln,they each receive $75 in profits.If one girl sets their stand on Welch while the other operates on Lincoln,the stand on Welch earns $300 in profits while the stand on Lincoln earns $225.Diagram the relevant pay-off matrix.Does either girl have a dominant strategy? Does the game have a Nash equilibrium? What is the maximin strategy of each player in the game?

Dale and Terry are racing automobiles around a track.Currently,Terry is in the lead.However,Dale has a faster car and is just behind Terry.The racers' strategies and pay-offs are presented in the table below. Does either player have a dominant strategy? Does the game have a Nash equilibrium? What is the maximin strategy of each player in the game?

Dale and Terry are racing automobiles around a track.Currently,Terry is in the lead.However,Dale has a faster car and is just behind Terry.The racers' strategies and pay-offs are presented in the table below.The goal of the drivers is to do as well as possible in the race.There are a total of 43 cars on the track. Does either player have a dominant strategy? Does the game have a Nash equilibrium? What is the maximin strategy of each player in the game?

Tony and Larry are managers of baseball teams that currently playing a game.It's late in the ballgame and Tony's team is currently winning and in the field.Tony's strategies are to bring in a right handed pitcher (RHP)or to bring in a left handed pitcher (LHP).Larry's strategies are to bring in a right handed pinch hitter (RPH)or to bring in a left handed pinch hitter (LPH).The pay-off matrix is in terms of winning (W)or losing (L)the game.Does either player have a dominant strategy? Does the game have a Nash equilibrium? What is the maximin strategy of each player in the game?

Casey's General Store is considering placing a store in Hamilton,Missouri.If they place the store in Hamilton and no other convenience store enters the Hamilton market,they'll earn profits of $100,000 per year.If competitors do enter,Casey's profits as well as the competitor's profits will be reduced to $0 per year.If a competitor enters the Hamilton market and Casey's does not,the competitor's profits will be $100,000 per year. Does either player have a dominant strategy? Does the game have any Nash equilibria? What is the maximin strategy of each player in the game?

Gym X and Bodyworks are both going to open an exercise facility in the local market.Each company may decide to open a facility concentrating on cardio equipment for customers interested in mostly aerobic workouts.Another alternative for each company is to open a facility concentrating on muscle building equipment for customers interested mostly in bodybuilding workouts.The pay-off matrix for each company dependent upon their strategies and that of their competitor is given below. Does either player have a dominant strategy? Does the game have any Nash equilibria? What is the maximin strategy of each player in the game?

Two firms in a local market compete in the manufacture of cyberwidgets.Each firm must decide if they will engage in product research to innovate their version of the cyberwidget.The pay-offs of each firm's strategy is a function of the strategy of their competitor as well.The pay-off matrix is presented below. Does either player have a dominant strategy? Does the game have any Nash equilibria? What is the maximin strategy of each player in the game?

A small regional airline is considering offering service to the Big City market.A large carrier already provides service to Big City.The small carrier's two strategies are: Enter Market or Do Not Enter.The large carrier's strategies are: Price Dump or Maximize Profits in the Short Run.By price dumping in the Big City market,the large carrier can force the small carrier out of business and make monopoly profits in the long-run.The long-run pay-offs are presented in the pay-off matrix below. Does either player have a dominant strategy? Does the game have any Nash equilibria? What is the maximin strategy of each player in the game?

Joanna has a credit card account with Card Bank.Card Bank's available strategies are to raise Joanna's credit card interest rate or do nothing.Joanna's available strategies are to transfer her Card Bank account balance to another creditor or do nothing.The strategy pay-offs are indicated below. Does either player have a dominant strategy? Does the game have any Nash equilibria? What is the maximin strategy of each player in the game?

Joanna has a credit card account with Card Bank.Card Bank's available strategies are tp raise Joanna's credit card interest rate or do nothing.Joanna's available strategies are to transfer her Card Bank account balance to another creditor or do nothing.If Card Bank raises Joanna's interest rate and Joanna does nothing,Card Bank increases profits by $1,000 while Joanna receives -$1,000.If Card Bank raises Joanna's interest rate and Joanna transfers her account to another creditor,Card Bank receives -$300 while Joanna receives -$100.If Card Bank does nothing and Joanna does nothing,each player receives $0.If Card Bank does nothing and Joanna transfers her account to another creditor,Card Bank receives -$300 while Joanna receives -$150.Diagram the game tree for this sequential game.Indicate any Nash equilibria.

Two firms in a local market compete in the manufacture of cyberwidgets.Each firm must decide if they will engage in product research to innovate their version of the cyberwidget.The pay-offs of each firm's strategy is a function of the strategy of their competitor as well.The pay-off matrix is presented below. Firm #2 chooses to innovate with probability 20/21.If Firm #1 does the same,what is the expected pay-off? Is this a Mixed Strategy Nash Equilibrium? Suppose,instead,that firm #2 innovates with probability 2/3.Should player #1 always innovate?

Two firms in a local market compete in the manufacture of cyberwidgets.Each firm must decide if they will offer a warranty or not.The pay-offs of each firm's strategy is a function of their competitor as well.The pay-off matrix is presented below. Does either player have a dominant strategy? Does the game have any Nash equilibria? What is the maximin strategy of each player in the game? Should the players use a mixed strategy?

Two firms in a local market compete in the manufacture of cyberwidgets.Each firm must decide if they will offer a warranty or not.The pay-offs of each firm's strategy is a function of their competitor as well.The pay-off matrix is presented below. If firm #1 announces it will offer a warranty regardless of what firm #2 does,is this a credible threat? Why or why not?

Two firms in a local market compete in the manufacture of cyberwidgets.Each firm must decide if it will offer a warranty or not.The pay-offs of each firm's strategy is a function of their competitor as well.The pay-off matrix is presented below. If firm #1 announces they will offer a warranty regardless of what firm #2 does,is this a credible threat? Why or why not?