Answer the following statements true (T) or false (F)
1) When each firm uses the strategy that maximizes its profit, it is possible for the equilibrium result to yield the worst possible joint equilibrium for all firms.
2) If Best Lights and Bright Lights are competing in a duopoly, Best Lights' profit depends solely on the decisions of its managers.
3) Every dominant strategy equilibrium is a Nash equilibrium, but not every Nash equilibrium is a dominant strategy equilibrium.
4) Cheap talk helps firms cooperate and earn higher profit.
5) If two players are in a finitely repeated game and both players know the final period, cooperation is not possible due to the end-period problem.
1) TRUE
2) FALSE
3) TRUE
4) FALSE
5) TRUE
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A Nash equilibrium occurs when each player in a game takes the ________ given the action of the other player
A) worst possible action for himself or herself B) best possible action for himself or herself C) most unpredictable possible action D) most mutually beneficial possible action E) best possible action for the other player
In a frictionless world
A) Fully funded social security must necessarily make everyone better off, as it provides for retirement. B) Fully-funded social security is a constraint on private saving behavior, and therefore cannot make anyone better off. C) Fully funded social security is always preferred to pay-as-you-go social security. D) Fully funded social security is more efficient, because it is a private program instead of a government program.