Question 1

What tactical term best describes the capacity relationship between Toyota and Honda such that Toyota's response is to reduce production output of the Rav 4 if Honda were to first announce a large increase in the production of the CR-V that drove down prices?
A)Tough commitment
B)Strategic complement
C)Soft commitment
D)Strategic substitute
E)Duopoly

Accepted Answer

The given scenario describes a strategic substitute relationship between Toyota's Rav 4 and Honda's CR-V, where an increase in production of one product leads to a decrease in demand for the other product. This drives down prices for the affected product and forces the competitor to reduce output. This is a classic example of strategic substitute, where the firms are not interdependent, and the actions of one firm directly affect the other firm's profits.

Question 2

What type of option exists when a decision maker has the opportunity to tailor a decision to information that will be received in the future?
A)Real option
B)Commitment option
C)Project option
D)Decision option
E)Future option

Accepted Answer

A real option is a type of option that arises from the opportunity for a decision maker to tailor a decision to information that will be received in the future. This option allows the decision maker to delay making a decision until more information is available, which can ultimately lead to a more profitable outcome. Therefore, the correct option is A) Real option.

Question 3

Which of the following statements is true about a tough commitment?
A)It is good for competitors
B)It is bad for competitors
C)In Cournot competition, elimination of production facilities is an example of a tough commitment
D)In Betrand competition, a commitment to increase prices is an example of a tough commitment
E)Tough commitments are always in the best interest of a firm

Accepted Answer

B

Question 4

What step of Ghemawat's framework for analyzing commitment intensive choices involves analyzing potential responses to the commitment by competitors and potential entrants in light of the commitments that they have made and the impact of those responses on competition?
A)Positioning analysis
B)Sustainability analysis
C)Flexibility analysis
D)Judgment analysis
E)Final Commitment analysis

Accepted Answer

Sustainability analysis involves evaluating how competitors and potential entrants might respond to a firm's commitment, considering their own commitments and the potential impact on the competitive landscape.

Question 5

Which of the following statements is true about a soft commitment?
A)It is bad for competitors
B)It is good for competitors
C)In Cournot competition, capacity expansion is an example of a soft commitment
D)In Betrand competition, a commitment to reduce prices is an example of a soft commitment
E)Tough commitments are always in the best interest of a firm

Accepted Answer

The answer of Which of the following statements is true...

Question 6

Which of the following characteristics must be satisfied for a commitment by one firm to generate the desired response from its competitors?
A)It must be visible
B)It must be understandable
C)It must be credible
D)a & c
E)All of the above

Accepted Answer

For a commitment to generate the desired response from competitors, it must be visible so that competitors are aware of it, understandable so that they can interpret the commitment correctly, and credible so that they believe the firm will follow through.

Question 7

Which of the following statements is true in general about firm actions that are strategic substitutes?
A)Reaction functions are downward sloping & the more of the action one firm chooses, the more of the action the other firm chooses
B)Reaction functions are downward sloping & the less of the action one firm chooses, the less of the action the other firm chooses
C)Reaction functions are upward sloping & the more of the action one firm chooses, the more of the action the other firm chooses
D)Reaction functions are upward sloping & the less of the action one firm chooses, the less of the action the other firm chooses
E)In the Cournot model, quantities are strategic substitutes

Accepted Answer

In the Cournot model, firms choose quantities, and these quantities are strategic substitutes, meaning that if one firm increases its quantity, the other firm will decrease its quantity.

Question 8

What step of Ghemawat's framework for analyzing commitment intensive choices involves analyzing whether the firm's commitment is likely to result in a product market position in which the firm delivers superior benefits to consumers or operates with lower costs than competitors?
A)Positioning analysis
B)Sustainability analysis
C)Flexibility analysis
D)Judgment analysis
E)Final Commitment analysis

Accepted Answer

The step that involves analyzing whether the firm's commitment is likely to result in a product market position in which the firm delivers superior benefits to consumers or operates with lower costs than competitors is positioning analysis. This step helps the firm understand the potential benefits of their commitment in terms of gaining a competitive advantage in the market.

Question 9

Which of the following statements is true in general about firm actions that are strategic complements?
A)Reaction functions are downward sloping & the more of the action one firm chooses, the more of the action the other firm chooses
B)Reaction functions are downward sloping & the less of the action one firm chooses, the less of the action the other firm chooses
C)Reaction functions are upward sloping & the more of the action one firm chooses, the more of the action the other firm chooses
D)Reaction functions are upward sloping & the less of the action one firm chooses, the less of the action the other firm chooses
E)In the Cournot model, quantities are strategic complements

Accepted Answer

In the case of strategic complements, the reaction functions are upward sloping, meaning that if one firm increases its level of action, the other firm will also increase its level of action.

Question 10

What type of effect describes the competitive side effects of the commitment that alter the tactical decisions of rivals and,ultimately,the market equilibrium?
A)Tactical effect
B)Financial effect
C)Direct effect
D)Strategic effect
E)Indirect effect

Accepted Answer

The strategic effect refers to the impact that a firm's commitment has on the actions of its competitors, leading to changes in market equilibrium. This can include shifts in pricing, product offerings, or other tactical decisions made by rivals in response to the commitment. The other options do not fully capture this competitive dynamic.

Question 11

Which of the following commitment strategies involves soft commitment postures,strategic complements for the stage 2 tactical variables,a refrain commitment action and an acceptance of the status quo out of fear thus waiting to follow the leader?
A)Top Dog
B)Lean and Hungry Look
C)Mad Dog
D)Puppy-Dog Ploy
E)Fat-Cat Effect

Accepted Answer

The answer of Which of the following commitment strategies involves...

Question 12

What is the most likely reason a firm would pursue the "mad-dog" commitment strategy of making a tough commitment when tactical variables are strategic complements,a strategy with harmful strategic effects?
A)For deterrence of new entrants by creating capacity competition
B)To exploit intangible weaknesses of other firms
C)To test the response of other market firms
D)For deterrence of new entrants by increasing price competition
E)They are following another firm

Accepted Answer

The answer of What is the most likely reason a...

Question 13

Which of the following commitment strategies involves tough commitment postures,strategic substitutes for the stage 2 tactical variables,a make commitment action and an assertion of dominance forcing rivals to back off?
A)Top Dog
B)Lean and Hungry Look
C)Mad Dog
D)Puppy-Dog Ploy
E)Fat-Cat Effect

Accepted Answer

The "Top Dog" strategy involves taking a tough commitment posture, using strategic substitutes, making a commitment action, and asserting dominance to force rivals to back off.

Question 14

Given the following payoff diagram: 
How much can firm 1 improve its outcome by committing to a strategy thus transforming the simultaneous move game to a sequential move game?
A)5
B)10
C)15
D)20
E)20.

Accepted Answer

The answer of Given the following payoff diagram: 
How much...

Question 15

What key element of a competitive move adds credibility to a making it a "true" commitment?
A)Fund raising
B)Public announcement
C)Relatedness factor
D)Irreversibility
E)Capacity expansion

Accepted Answer

Irreversibility is the key element that adds credibility to a competitive move, making it a "true" commitment. Once a decision is made that cannot be easily reversed, it shows that the company is serious about its commitment and is willing to make significant changes to achieve its goals. Fundraising, public announcement, relatedness factor, and capacity expansion can all be part of a competitive move, but they do not necessarily indicate a true commitment.

Question 16

What type of effect describes how a commitment impacts the present value of the firm's profits,assuming the firm adjusts its own tactical decisions in light of this commitment and that its competitor's behavior does not change?
A)Tactical effect
B)Financial effect
C)Direct effect
D)Strategic effect
E)Indirect effect

Accepted Answer

The answer of What type of effect describes how a...

Question 17

What process involves using computer simulations to track the likely competitive implications of pricing and investment decisions over many years?
A)Regression testing
B)Virtual reality
C)War gaming
D)Commitment testing
E)Scenario testing

Accepted Answer

The answer of What process involves using computer simulations to...

Question 18

What term describes a decision that has a long-term impact and is difficult to reverse?
A)Dedicated investment
B)Strategic commitment
C)Critical choice
D)Market investment
E)Firm commitment

Accepted Answer

The answer of What term describes a decision that has...

Question 19

What type of contractual clause in a sales contract with a buyer provides a provision such that the seller is obligated to extend the same price terms to the buyer that it extends to other customers?
A)Indemnification clause
B)Most favored customer clause (MFCC)
C)Escape clause
D)Money back guarantee
E)Meet the competition clause (MCC)

Accepted Answer

A most favored customer clause (MFCC) provides a provision that requires a seller to extend the same price terms to the buyer that it extends to other customers. This clause ensures that the buyer gets the same treatment and price as the seller's other customers.

Question 20

What tactical term best describes the pricing relationship between Toyota and Honda such that Toyota's response is to lower the price on the Camry if Honda were to first announce a large price cut on the Accord?
A)Tough commitment
B)Strategic complement
C)Soft commitment
D)Strategic substitute
E)Duopoly

Accepted Answer

Strategic complement means that the action of one firm (e.g., Honda) complements the action of another firm (e.g., Toyota). In this case, if Honda lowers the price of the Accord, Toyota's best response is to lower the price of the Camry.

Quiz 9: Strategic Commitment

What tactical term best describes the capacity relationship between Toyota and Honda such that Toyota's response is to reduce production output of the Rav 4 if Honda were to first announce a large increase in the production of the CR-V that drove down prices?

What type of option exists when a decision maker has the opportunity to tailor a decision to information that will be received in the future?

Which of the following statements is true about a tough commitment?

What step of Ghemawat's framework for analyzing commitment intensive choices involves analyzing potential responses to the commitment by competitors and potential entrants in light of the commitments that they have made and the impact of those responses on competition?

Which of the following statements is true about a soft commitment?

Which of the following characteristics must be satisfied for a commitment by one firm to generate the desired response from its competitors?

Which of the following statements is true in general about firm actions that are strategic substitutes?

What step of Ghemawat's framework for analyzing commitment intensive choices involves analyzing whether the firm's commitment is likely to result in a product market position in which the firm delivers superior benefits to consumers or operates with lower costs than competitors?

Which of the following statements is true in general about firm actions that are strategic complements?

What type of effect describes the competitive side effects of the commitment that alter the tactical decisions of rivals and,ultimately,the market equilibrium?

Which of the following commitment strategies involves soft commitment postures,strategic complements for the stage 2 tactical variables,a refrain commitment action and an acceptance of the status quo out of fear thus waiting to follow the leader?

What is the most likely reason a firm would pursue the "mad-dog" commitment strategy of making a tough commitment when tactical variables are strategic complements,a strategy with harmful strategic effects?

Which of the following commitment strategies involves tough commitment postures,strategic substitutes for the stage 2 tactical variables,a make commitment action and an assertion of dominance forcing rivals to back off?

Given the following payoff diagram: How much can firm 1 improve its outcome by committing to a strategy thus transforming the simultaneous move game to a sequential move game?

What key element of a competitive move adds credibility to a making it a "true" commitment?

What type of effect describes how a commitment impacts the present value of the firm's profits,assuming the firm adjusts its own tactical decisions in light of this commitment and that its competitor's behavior does not change?

What process involves using computer simulations to track the likely competitive implications of pricing and investment decisions over many years?

What term describes a decision that has a long-term impact and is difficult to reverse?

What type of contractual clause in a sales contract with a buyer provides a provision such that the seller is obligated to extend the same price terms to the buyer that it extends to other customers?

What tactical term best describes the pricing relationship between Toyota and Honda such that Toyota's response is to lower the price on the Camry if Honda were to first announce a large price cut on the Accord?