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University of the Cumberlands MBA 531 ASSIGNMENT TWELVE CHAPTERS 16 BARGAINING AND DECSION UNCERTAINTY MULTIPLE CHOICE 1)In the strategic view of bargaining: a

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University of the Cumberlands

MBA 531

ASSIGNMENT TWELVE

CHAPTERS 16 BARGAINING AND DECSION UNCERTAINTY MULTIPLE CHOICE

1)In the strategic view of bargaining:

a.            Bargaining is described by standard game theory rules

b.            The game is played without specific strategies

c.             The game always results in a fifty-fifty split

d.            The game is played just for the fun of it

 

2.            In the simultaneous move labor negotiation game:

a.            Neither party prefers bargaining hard in the Nash equilibrium

b.            Both the parties want to end up in the least efficient outcome c. Both parties bargain hard in the Nash equilibrium

d. Both parties want to stay in the prisoner’s dilemma

 

3.            When buying a car from a commission salesman you improve your bargaining position by a. shopping for last year's model when the new model year cars are arriving

b.            shopping when the showroom is full of customers

c.             shopping when the car lot has few cars left unsold

d.            shopping toward the beginning of the month

 

4.            In the strategic sequential labor negotiation game: a. The first mover has an advantage

b.            The second mover has an advantage

c.             There is no advantage to either mover

d.            None of the above

 

5.            In the sequential negotiation games:

a.            You can induce a change in the strategy in your opponent only if your threat is believed

b.            Any threat can induce a change in strategy in your opponent

c.             The best threat is the one that you do not have to carry out d. A and C

 

For the following questions 8-16 use this setup.

Consider a simultaneous move game between a union and a company. If both the parties bargain hard, each would gain nothing. If only one party bargains hard the accommodating party gets a profit of $1 million while the bargaining party gets a $5 million, while if they both accommodate, they each get $3 million.

6.            What would be the Nash equilibrium of this game?

a.            Bargain hard, bargain hard

b.            Firm bargains hard, union accommodates

c.             Union bargains hard, firm accommodates d. Both B&C

 

7.            Is this Nash equilibrium efficient?

a.            Yes, because the sum of payoffs is highest

b.            No, because both the parties can do better

c.             No, because both the parties are maximizing their profits

d.            All of the above

 

8.            Could either party do better?

a.            Yes, both parties can do better without hurting each other if they cooperated b. Yes, one party can do better, but only at the expense of the other

c. No, neither party can do better

d. No, each party has its best possible outcome

 

9.            If the Union threatens a strike, what is the firm’s best response?

a.            Bargain hard b. Accommodate

c. Run

d. Hide

 

10.          If the union leader has already sent strikers to the picket line before entering negotiations, the union has

a.            Eliminated half of the strategies of the game

b.            Forced the firm to choose the best response in the union’s best interest

c.             Made it in the firm’s best interest to accommodate their requests d. All of the above

 

11.          If the firm hires security guards to enforce a lockout, what are they implying?

a.            They would always accommodate

b.            They would always bargain hard

c.             They would not accommodate d. Both B&C

 

12.          If the firm threatens a lockout (and the threat is credible), what is the union’s best response?

a.            Bargain hard b. Accommodate

c. Run

d. Hide

 

13.          By threatening to lockout the workers, the firm has

a.            Eliminated half of the strategies

b.            Forced the union to choose the best response in the firm’s best interest

c.             Made it in the union’s best interest to not strike d. All of the above

 

14.          When a variable can take on different values a. it is a random variable

b.            it is a dependent variable

c.             it is an dummy variable

d.            it is an endogenous variable

 

15.          Expected value is

a.            (Probability of state A+Value in state A) (Probability of state B+Value in state B) b. (Probability of state A*Value in state A)+(Probability of state B*Value in state B)

c. (Probability of state A*Value in state A)-(Probability of state B*Value in state B)

d. (Probability of state A-Value in state A) (Probability of state B-Value in state B)

 

16.          In a coin toss bet, where both heads and tails are equally likely, you win a dollar on heads but lose a dollar on tails.

The expected value of the bet is a. $0.50

b. -$0.50

c. $1.00 d. $0.00

 

17.          You can invest $100,000 into either project A or B. You estimate that A would succeed with a probability of 0.7 in which case it doubles in value. If it fails, its scrap value is $50,000. Project B would succeed with probability 0.6, in which case it would have a value of $150,000. If it fails, project B’s scrap value is $30,000. Which project should you invest in?

a.            Project A

b.            Project B

c.             Neither of the projects

d.            You cannot tell from the information presented

 

18.          You can invest $100,000 into either project A or B. You estimate that A would succeed with a probability of 0.5 in which case it doubles in value. If it fails, its scrap value is $50,000. Project B would succeed with probability 0.8, in which case it would have a value of $150,000. If it fails, project B’s scrap value is $30,000. Which project should you invest in?

a.            Project A b. Project B

c. Neither of the projects

d. You cannot tell from the information presented

 

19.          You can either invest in project A or B. Project A could have a value of $100 with a probability of 0.1 or a value of

$75 with probability 0.9. Project B could have a value of $110 with probability 0.2 or a value of $70 with a probability of

0.8.         Which project should you invest in?

a. Project A b. Project B

c. Neither of the projects

d. You cannot tell from the information presented

 

20.          A pharmaceutical company executive has to decide whether to fund a new drug development project. For this project, a success would earn $90 million and a failure would cost $10 million in lost profits. At what probability of expected success should she fund the project?

a. 0.10

b. 0.20

c. 0.80

d. 0.90

 

 

SHORT ESSAYS

1.            Transcendent Technologies is deciding between developing complicated, thought-activated software, or simple, voice-activated software. The voice-activated software would cost $50 million to develop and has a 60% chance of being successfully launched and generating revenue of $100 million. The thought- activated software would be a bonanza if successful, generating $1 billion in revenue. But it is so complicated, it is projected to cost would be $400 million. How likely would success have to be for Transcendent Technologies to opt for the thought-activated software?

 

 

2.            A buyer for a department store must decide on which designs the stores will carry before he knows what the demand will be in the coming season. Choosing a poorly demanded design means lots of unsold merchandise and losses that are $200,000 on average. Passing on a highly demanded design means unsold merchandise and missing out on profits that are $300,000 on average. What probability of a design’s success should he be in order to choose to carry it?