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University of the Cumberlands MBA 531 ASSIGNMENT ELEVEN CHAPTER 15 GAME THEORY MULTIPLE CHOICE 1)In sequential games, a

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University of the Cumberlands

MBA 531

ASSIGNMENT ELEVEN

CHAPTER 15 GAME THEORY

MULTIPLE CHOICE

1)In sequential games,

a. Players take turns and observe their rivals choices before they make their choices

b.            Players take turns but don’t observe their rivals choices before they make their choices

c.             Players move at the same time

d.            None of the above

Use the following case from questions 2-10

Irene’s Dairy is deciding whether or not to enter the market for ice cream, currently monopolized by Mattie’s Ice-cream. If it enters the market, Mattie’s can either accommodate him and share his 10million in profits equally with Irene or fight him and cause a 5million loss for each in a price war.

2.            In a sequential game, if Irene decides to enter the market, what would be Mattie’s best response? a. Accommodate

b.            Fight

c.             Run away

d.            Shut down

3.            In a sequential game, given Mattie’s best response function, what would Irene’s best response be?

a.            Not enter the market b. Enter the market

c. Fight

d. Run away

4.            What would the Nash equilibrium be in this sequential game?

a.            Enter, fight

b.            Enter, Accommodate

c.             Do not enter, Fight

d.            Do not enter, Accommodate

5.            What would the profits be for Mattie’s Dairy if Irene does not enter the market?

a.            5million b. 10million

c. 15million

d. Zero

6.            What would be the profits for Mattie’s Dairy in equilibrium if Irene does enter the market?

a.            5 million loss b. 5 million

c. 10 million

d. 20 million

7.            What would be the profits for Irene’s Dairy in equilibrium?

a.            5 million loss b. 5 million

 

c. 10 million

d. 20 million

8.            If Mattie wants to discourage Irene from entering the market, what strategy should she follow?

a.            Threaten to always accommodate

b.            Always accommodate c. Threaten to always fight

d. All of the above

9.            If Mattie’s threatens to always fight, what would Irene’s best response be?

a.            Enter

b.            Not enter

c.             Run

d.            All of the above

10.          Given that Mattie could convincingly threatens to always fight, what would be Irene’s best response

a.            Enter

b.            Not Enter

c.             Run

d.            Hide

Use the following case from questions 11-17

Two siblings, Sarah and Tom are playing a simultaneous hit and tell game. Sarah can hit Tom or not and Tom can tattle on Sarah or not. Relative to no hitting and no tattling, if Sarah hits Tom, and he tattles they both experience a loss of 10. Not telling, gets Tom a bruise, a loss of 5 but Sarah gains 5. If he tattles untruthfully, he gets a gain of 5 and Sarah loses 5. If they get along, no one gets anything

11.          If Sarah decides to hit Tom, what would Tom’s best response be

a.            Tell

b.            Not tell

c.             Run

d.            Hide

12.          If Tom tattles, what would Sarah’s best response be

a.            Hit

b.            Not hit

c.             Run

d.            Hide

13.          If Sarah decides not to hit Tom, what would Tom’s best response be a. Tell

b.            Not tell

c.             Run

d.            Hide

14.          If Tom does not tattle, what would Sarah’s best response be a. Hit

b.            Not hit

c.             Run

d.            Hide

 

15.          What would be the Nash equilibrium of this simultaneous game?

a.            Hit, Tell

b.            Not hit, Tell

c.             Hit, Not tell d. Both B&C

16.          If Tom wants to not be hit, what strategy could he follow

a.            Threaten to not tell

b.            Always not tell c. Threaten to tell

d. All of the above

17.          If Tom threatens to tell, what would Sarah’s best response be?

a.            Hit

b.            Not hit

c.             Run

d.            Hide

Use the following case from questions 18

Two siblings, Bratty Brad and Mousey Mike are playing a simultaneous hit and tell game. Bratty Brad can hit Mousey Mike or not and Mousey Mike can tattle on Bratty Brad or not. Relative to no hitting and no tattling, if Bratty Brad hits Mousey Mike, and he tattles they both experience a loss of 10. Not telling, gets Mousey Mike a bruise, a loss of 5 but Bratty Brad gains 5. If he tattles untruthfully, Mousey Mike gets a gain of 5 and Bratty Brad loses 5. If they get along, no one gets anything

18.          If Bratty Brad decides to hit Mousey Mike, what would Mousey Mike’s best response be

a.            Tell

b.            Not tell

c.             Run

d.            Hide

19.          If Mousey Mike tattles, what would Bratty Brad’s best response be

a.            Hit

b.            Not hit

c.             Run

d.            Hide

20.          If Bratty Brad decides not to hit Mousey Mike, what would Mousey Mike’s best response be? a. Tell

b.            Not tell

c.             Run

d.            Hide

 

SHORT ESSAY (S)

1.            Nestlé’s has over one hundred production facilities that all purchase hair nets and other hygienic supplies through independent suppliers. Nestlé created a centralized purchasing system that is cumbersome to use has the potential to bargain for lower prices. Suppose that a division can purchase hairnets for $8 independently. If they all purchase through the central system, hairnets cost $6. But if one division uses the system and the other purchases independently, the cost to the first is $9 while the cost to the second is $7.

 

What does the simultaneous move game look like and what is the equilibrium?