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Game Theory

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1.A strategy describes

a. a complete specification of what a player will do under each contingency of playing the game.
b. a single move that a player makes in the process of competing with a rival.
c. the payoff that a player will receive only when there is a single possible outcome.
d. the move made by a rival in a tit-for-tat game.
e. the solution to the prisoner's dilemma game.

2.By definition, a Nash equilibrium in a duopoly is the situation in which each player

a. plays a dominant strategy.
b. plays the best strategy given the other's strategies.
c. gets the highest possible payoff.
d. gets the highest payoff possible without lowering the opponent's payoff.
e. is happy with the outcome.

3.Which pair of strategies would competing firms A and B choose given this payoff matrix?

B's Strategies
A's Strategies Y X
W (A gets -2, B gets 2) (A gets 1, B gets 1)
X (A gets 0, B gets 0) (A gets 3, B gets -6)

a. W, Y
b. W, Z
c. X, Y
d. X, Z
e. Either X, Y or W, Z

4.How many Nash equilibria are there in this payoff matrix?

B's Strategies
A's Strategies Enter Don't Enter
Raise price (A gets 6, B gets 4) (A gets 10, B gets 8)
Lower price (A gets 8, B gets 6) (A gets 3, B gets 5)

a. 0
b. 1
c. 2
d. 3
e. 4

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Game Theory: Economics & Business

Question Details:
The "Prisoner's Dilemma" was the gateway to the strategic viewpoint of game theory. In this assignment, you will explore the applications of game theory to economic business decisions.
Use the following information to ensure successful completion of the assignment:
1 Include two scholarly resources other than those in the assigned readings with appropriate references and in-text citations.
2 This assignment uses a grading rubric that can be viewed at the assignment's drop box. Instructors will be using the rubric to grade the assignment; therefore, students should review the rubric prior to beginning the assignment to become familiar with the assignment criteria and expectations for successful completion of the assignment.
3 Prepare this assignment according to the APA guidelines found in the APA Style Guide, located in the Student Success Center. An abstract is not required.
In a paper of 1,750-2,000 words, discuss how game theory is being applied to business decisions. Include the following:
1 A brief overview of game theory.
2 A description of the economic implications of game theory.
A description of how game theory is being applied in making business decisions.

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