ECON10004 Lecture Notes - Lecture 21: Subgame Perfect Equilibrium, Nash Equilibrium, Subgame
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1. Which of the following statements about oligopolies is not correct?
a. | Oligopolistic firms always charge the monopoly price. | |
b. | Oligopolistic firms are interdependent in a way that firms in perfect competition are not. | |
c. | An oligopolistic market has only a few sellers. | |
d. | The actions of any one seller can have a large impact on the profits of all other sellers. |
2. Which is true of an oligopoly market that reaches a Nash equilibrium?
a. | The firms will not have behaved as profit maximizers. | |
b. | A firm will have chosen its best strategy, given the strategies chosen by other firms in the market. | |
c. | A firm will not take into account the strategies of competing firms. | |
d. | The market price will be different for each firm. |
3. In game theory, what is a dominant strategy?
a. | the best strategy for a player to follow, regardless of the what strategies other players use | |
b. | a strategy that makes every player better off | |
c. | a strategy that must appear in every game | |
d. | the best strategy for a player to follow only if other players are cooperative |
4. Which of the following situations produces the largest profits for oligopolists?
a. | The firms reach a Nash equilibrium. | |
b. | The firms combine to produce the monopoly output level. | |
c. | The firms set prices equal to marginal cost. | |
d. | The firms produce a quantity of output that lies between the competitive outcome and the monopoly outcome. |
1. Which of the following statements about oligopolies is not correct?
a. | Oligopolistic firms always charge the monopoly price. | |
b. | Oligopolistic firms are interdependent in a way that firms in perfect competition are not. | |
c. | An oligopolistic market has only a few sellers. | |
d. | The actions of any one seller can have a large impact on the profits of all other sellers. |
2. Which is true of an oligopoly market that reaches a Nash equilibrium?
a. | The firms will not have behaved as profit maximizers. | |
b. | A firm will have chosen its best strategy, given the strategies chosen by other firms in the market. | |
c. | A firm will not take into account the strategies of competing firms. | |
d. | The market price will be different for each firm. |
3. In game theory, what is a dominant strategy?
a. | the best strategy for a player to follow, regardless of the what strategies other players use | |
b. | a strategy that makes every player better off | |
c. | a strategy that must appear in every game | |
d. | the best strategy for a player to follow only if other players are cooperative |
4. Which of the following situations produces the largest profits for oligopolists?
a. | The firms reach a Nash equilibrium. | |
b. | The firms combine to produce the monopoly output level. | |
c. | The firms set prices equal to marginal cost. | |
d. | The firms produce a quantity of output that lies between the competitive outcome and the monopoly outcome. |
QUESTION 3
Mark all the FALSE statements
A. | An equilibrium is a collection of strategies (and a strategy is a complete plan of action), whereas an outcome describes what will happen only in the contingencies that are expected to arise, not in every contingency that might arise. | |
B. | In games of complete but imperfect information, backward induction is still the strongest process to solve the model to get unique equilibrium. | |
C. | All subgame perfect Nash equilibria (SPNE) are Nash equilibria (NE), but not all Nash equilibria is SPNE | |
D. | We cannot apply the notion of Nash equilibrium to dynamic games of complete information if we allowed a player s strategy to leave unspecified actions in some contingencies. | |
E. | A game can be of perfect information whenever Nature or Luck does not play, each information set does not necessarily need to have a single node. |
20 points
QUESTION 4
True or false. Mark the correct sequence:
I. Simultaneity of moves means that these games have imperfect information.
II. Dynamic games of complete and perfect information do not necessarily need that a player observes all the previous moves, just part of them are fine.
III. Backward induction and subgame perfect equilibrium concept lead to the same result in games of incomplete information.
IV. Any game in extensive form is a subgame itself.
A. | TFFT | |
B. | TTTF | |
C. | FTFF | |
D. | TTFT |
20 points
QUESTION 5
The subgame perfect Nash equilibrium is the equilibrium associated with ____________ outcome. Subgame perfect equilibrium ________ non-credible threats.
A. | Maxmin; involves | |
B. | the backward induction; does not involve | |
C. | Iterative deletion of weakly dominated strategies; rules out | |
D. | the backward induction; includes |