Question 1

Rational players should _______________ use a dominated strategy.
A) occasionally
B) always
C) never

Accepted Answer

A dominated strategy is always inferior, as there exists another strategy that is at least as good in every scenario and strictly better in at least one scenario. Therefore, rational players should never use a dominated strategy.

Question 2

A two-person game in which player 1 divides an amount of money between the two players and the opponent either accepts or rejects the proposal is called a(n)
A) trigger game
B) ultimatum game
C) grim strategy game

Accepted Answer

The described game is the ultimatum game, where player 1 is known as the proposer and player 2 as the responder. The proposer divides a sum of money and offers a portion of it to the responder. The responder can either accept the offer, and both players receive their allocated amount, or reject the proposal, resulting in both players receiving nothing. The ultimatum game is used to study fairness, social norms, and decision-making behavior. Therefore, the best choice is B, the ultimatum game.

Question 3

A threat in a strategic game that is not believable or would not be carried out if called upon is known as a(n)
A) noncredible threat
B) credible threat
C) incredible threat

Accepted Answer

A noncredible threat is a bluff or empty threat that is not likely to be carried out, and therefore lacks credibility. It can be easily identified by the opponent, and does not have the intended impact. A credible threat, on the other hand, is a real and viable threat that the opponent believes will be carried out if necessary. An incredible threat refers to a threat that is too unbelievable or far-fetched to be taken seriously by the opponent.

Question 4

A mixed strategy equilibrium is where players use
A) mixed strategies
B) normal strategies
C) pure strategies

Accepted Answer

In a mixed strategy equilibrium, players do not rely on one particular strategy but mix between different strategies. This often leads to a more unpredictable outcome and can help players avoid being exploited by other players who try to exploit their predictable behavior. Therefore, using mixed strategies is often the best choice in certain game scenarios.

Question 5

Whenever a game arrives at a unique outcome using the strong or weak version of the iterative elimination of dominated strategies, we call the game
A) dominance-solvable
B) extensive
C) strictly dominated

Accepted Answer

When a game arrives at a unique outcome using the strong or weak version of the iterative elimination of dominated strategies, we call the game dominance-solvable. Therefore, option A) is the correct choice. Option B) is incorrect because an extensive game refers to a game with sequential moves and perfect information. Option C) is also incorrect because a strictly dominated strategy refers to a strategy that is dominated by another strategy regardless of the opponent's strategy.

Question 6

Strategies that define probability mixtures over all or some of the pure strategies in the game are called
A) mixed strategies
B) super-pure strategies
C) gambles

Accepted Answer

Probability mixtures over all or some of the pure strategies in the game are called mixed strategies. Option B (super-pure strategies) and Option C (gambles) are not correct definitions of such strategies.

Question 7

If one player in a game uses a mixed strategy that leaves the other player with a unique pure strategy best response, a mixed strategy equilibrium ___________ exist.
A) does not
B) does
C) It is not possible answer without knowing the probabilities

Accepted Answer

If one player has a unique pure strategy best response to the mixed strategy of the other player, then the mixed strategy is not a Nash equilibrium. Therefore, a mixed strategy equilibrium does not exist.

Question 8

The equilibrium in a game in which all players use their dominant strategies is known as a
A) Nash equilibrium
B) dominant-strategy equilibrium
C) dominated-strategy equilibrium

Accepted Answer

When all players use their dominant strategies, it results in a dominant-strategy equilibrium. This occurs when each player's dominant strategy is also their best response to the strategies of the other players. A Nash equilibrium, on the other hand, occurs when each player's strategy is a best response to the strategies of the other players, but these strategies may not necessarily be dominant. A dominated-strategy equilibrium, as the name suggests, is a situation where each player is playing a dominated strategy, which is never a best response to the strategies of the other players.

Question 9

A threat that, if the game ever progresses to the point where the threat is supposed to be carried out will, in fact, be acted on is known as a(n)
A) noncredible threat
B) credible threat
C) incredible threat

Accepted Answer

A credible threat is a threat that is believed to be real and likely to be carried out if circumstances warrant it. On the other hand, a noncredible threat is a threat that is not taken seriously by the recipient, and an incredible threat is a threat that is so outlandish or improbable that it is dismissed as not being a serious threat at all.

Question 10

Explain how the traditional view of rationality and equity applies to game theory.

Accepted Answer

The answer of Explain how the traditional view of rationality...

Question 11

The professor says to the student, "I have already told you ten times today not to text message during class. If I catch you doing it again, I will ask you to leave the classroom." In game theory terms, how would you describe the professor's statement?

Accepted Answer

The answer of The professor says to the student, "I...

Question 12

A set of strategies that constitute a Nash equilibrium, where the actions prescribed by these strategies for the players once they reach any subgame constitute a Nash equilibrium for that subgame is called a(n)
A) subgame perfect equilibrium
B) imperfect subgame equilibrium
C) backward equilibrium

Accepted Answer

A subgame perfect equilibrium is a refinement of Nash equilibrium, where the strategies prescribed not only constitute a Nash equilibrium for the overall game but also for every subgame of the original game. This means that the strategies are optimal not only at the beginning of the game but also at every decision point within the game. Therefore, a subgame perfect equilibrium is a more stringent and desirable solution concept than a simple Nash equilibrium, and thus, choice A is the best answer. Choice B, imperfect subgame equilibrium, is not a well-defined concept, and choice C, backward equilibrium, is not a recognized equilibrium concept.

Question 13

Distinguish between strict and weak domination.

Accepted Answer

The answer of Distinguish between strict and weak domination....

Question 14

A game in which the players have a common interest in reaching an equilibrium yet, if there are multiple equilibria, their preferences may differ as to which is the best, is called a
A) mixed strategy
B) coordination game
C) noncooperative game

Accepted Answer

A coordination game is a type of game where players have a common interest in reaching an equilibrium, but there may be multiple equilibria and each player may have different preferences as to which equilibrium is best. In this type of game, the players must coordinate their actions in order to achieve the desired outcome. A mixed strategy involves players choosing different actions with a certain probability, while a noncooperative game involves players making decisions independently without considering the other player's actions.

Question 15

What must the rules of a game of strategy specify?

Accepted Answer

The answer of What must the rules of a game...

Question 16

The expected __________ of a strategy is the probability-weighted __________ the player can expect to receive.
A) mixture, payoff
B) value, equilibrium
C) value, payoff

Accepted Answer

The expected value of a strategy is the probability-weighted average of the payoff the player can expect to receive. Choice C accurately describes this concept. Choice A includes the term "mixture," which is not necessarily relevant to this definition. Choice B includes the term "equilibrium," which is not necessary for defining expected value.

Question 17

The only situation in which a mixed strategy equilibrium arises is one where the mixed strategies chosen leave both players indifferent between the payoffs they expect to receive from their
A) pure strategies
B) extensive strategies
C) mixed strategies

Accepted Answer

In a mixed strategy equilibrium, players are choosing a combination of strategies with a certain probability, which means they are not playing their pure strategies with 100% probability. However, if a player has a dominant strategy (i.e. one strategy that always yields a better payoff than any other strategy, regardless of the choice of the other player), they will always choose that strategy, and there will be no need for a mixed strategy. Therefore, the only situation when a mixed strategy equilibrium arises is when there is no dominant strategy for either player, and they are indifferent between their pure strategies.

Question 18

If strategy 1 weakly dominates strategy 2, which of the following must be true?
A) Strategy 1 is strictly better than strategy 2 when the opponent chooses strategy 1 and strictly better than strategy 2 when the opponent chooses strategy 2
B) Strategy 1 is just as good as strategy 2 when the opponent chooses strategy 1 and just as good as strategy 2 when the opponent chooses strategy 2
C) Strategy 1 is just as good as strategy 2 when the opponent chooses strategy 1 and strictly better than strategy 2 when the opponent chooses strategy 2

Accepted Answer

If strategy 1 weakly dominates strategy 2, it means that strategy 1 is at least as good as strategy 2 in all scenarios, and strictly better in at least one scenario. Therefore, strategy 1 is just as good as strategy 2 when the opponent chooses strategy 1 (because both will result in equally good outcomes), but strictly better than strategy 2 when the opponent chooses strategy 2 (because strategy 2 can only match strategy 1 in the best-case scenario, but can do worse in other scenarios).

Question 19

To produce Nash equilibria in mixed strategy games, we must expand the definition of a strategy to include not only the choice of an action, but also the
A) names of the players
B) probability of credible threats
C) probability of the action being chosen

Accepted Answer

In mixed strategy games, players make probabilistic choices, and therefore, the probability of the action being chosen must be included in the definition of a strategy. The names of the players and the probability of credible threats are not relevant to the definition of a strategy in mixed strategy games.

Quiz 11: Game Theory and the Tools of Strategic Business Analysis

Rational players should _______________ use a dominated strategy.

A two-person game in which player 1 divides an amount of money between the two players and the opponent either accepts or rejects the proposal is called a(n)

A threat in a strategic game that is not believable or would not be carried out if called upon is known as a(n)

A mixed strategy equilibrium is where players use

Whenever a game arrives at a unique outcome using the strong or weak version of the iterative elimination of dominated strategies, we call the game

Strategies that define probability mixtures over all or some of the pure strategies in the game are called

If one player in a game uses a mixed strategy that leaves the other player with a unique pure strategy best response, a mixed strategy equilibrium ___________ exist.

The equilibrium in a game in which all players use their dominant strategies is known as a

A threat that, if the game ever progresses to the point where the threat is supposed to be carried out will, in fact, be acted on is known as a(n)

Explain how the traditional view of rationality and equity applies to game theory.

The professor says to the student, "I have already told you ten times today not to text message during class. If I catch you doing it again, I will ask you to leave the classroom." In game theory terms, how would you describe the professor's statement?

A set of strategies that constitute a Nash equilibrium, where the actions prescribed by these strategies for the players once they reach any subgame constitute a Nash equilibrium for that subgame is called a(n)

Distinguish between strict and weak domination.

A game in which the players have a common interest in reaching an equilibrium yet, if there are multiple equilibria, their preferences may differ as to which is the best, is called a

What must the rules of a game of strategy specify?

The expected of a strategy is the probability-weighted the player can expect to receive.

The only situation in which a mixed strategy equilibrium arises is one where the mixed strategies chosen leave both players indifferent between the payoffs they expect to receive from their

If strategy 1 weakly dominates strategy 2, which of the following must be true?

To produce Nash equilibria in mixed strategy games, we must expand the definition of a strategy to include not only the choice of an action, but also the