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Explain why it is unwise to bid more than your valuation of the good in a sealed bid second-price auction.

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Assume you have a valuation of the good ...

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Mutually Assured Destruction was a standing policy during the Cold War,in which the United States and the U.S.S.R.maintained and expanded nuclear arsenals beyond practical levels.What could explain such a phenomenon?


A) insane public officials who were bent on world domination
B) a prisoners' dilemma
C) a leader-follower type game
D) tacit collusion

E) B) and D)
F) None of the above

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The ability to deter entry requires


A) a credible threat that if entry occurs the firm is willing to produce more than they would otherwise.
B) a credible threat that if entry occurs the firm will not produce more than they would otherwise.
C) a good lawyer.
D) a clever accounting department.

E) All of the above
F) C) and D)

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What is an example of the bidder's curse?


A) addiction to auctions
B) paying less than the auctioned good value
C) Bid a value that is higher than the price of the good at a retail store.
D) Never win an auction.

E) A) and C)
F) None of the above

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Suppose two firms,A and B,are simultaneously considering entry into a new market.If neither enters,both earn zero.If both enter,they both lose 100.If one firm enters,it gains 50 while the other earns zero.Set up the payoff matrix for this game and determine if any Nash equilibria exist.Can you predict the outcome? What if firm A gets to decide first?

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blured image See the above figure.There are two Nash...

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A private auction is an auction in which


A) individuals know their own value of the good and everyone else's valuation, too.
B) individuals have their own valuation of the good but don't know everyone else's.
C) many auctions are auctioned off at the same time.
D) only one good is auctioned off.

E) All of the above
F) B) and D)

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The internet auction site eBay is an example of a(n)


A) Sealed Bid Auction.
B) Second-Price Auction.
C) English Auction.
D) Both A and B.

E) B) and D)
F) B) and C)

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-The above figure shows a payoff matrix for two firms,A and B,that must choose between a high-price strategy and a low-price strategy.For firm B, A) setting a high price is the dominant strategy. B) setting a low price is the dominant strategy. C) there is no dominant strategy. D) doing the opposite of firm A is always the best strategy. -The above figure shows a payoff matrix for two firms,A and B,that must choose between a high-price strategy and a low-price strategy.For firm B,


A) setting a high price is the dominant strategy.
B) setting a low price is the dominant strategy.
C) there is no dominant strategy.
D) doing the opposite of firm A is always the best strategy.

E) B) and C)
F) C) and D)

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A sale in which property or a service is sold to the highest bidder is called a(n)


A) auction.
B) bidder sale.
C) competitive market.
D) Austrian bundle.

E) B) and D)
F) A) and C)

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-The above figure shows a payoff matrix for two firms,A and B,that must choose between selling basic computers or advanced computers.Which of the following is a Nash equilibrium? A) Both firms make advanced computers. B) Both firms make basic computers. C) Firm A makes basic computers and firm B makes advanced computers. D) There are no Nash equilibria. -The above figure shows a payoff matrix for two firms,A and B,that must choose between selling basic computers or advanced computers.Which of the following is a Nash equilibrium?


A) Both firms make advanced computers.
B) Both firms make basic computers.
C) Firm A makes basic computers and firm B makes advanced computers.
D) There are no Nash equilibria.

E) B) and C)
F) All of the above

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-The above figure shows the payoff to two gasoline stations,A and B,deciding to operate in an isolated town.If firm A chooses its strategy first,then A) firm A will not enter. B) firm B's entry is blockaded. C) both firms will enter. D) firm A will enter and firm B will not. -The above figure shows the payoff to two gasoline stations,A and B,deciding to operate in an isolated town.If firm A chooses its strategy first,then


A) firm A will not enter.
B) firm B's entry is blockaded.
C) both firms will enter.
D) firm A will enter and firm B will not.

E) All of the above
F) C) and D)

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-The above figure shows the payoff matrix facing an incumbent firm.Assuming a fixed cost of entry,will the incumbent deter entry? Why? -The above figure shows the payoff matrix facing an incumbent firm.Assuming a fixed cost of entry,will the incumbent deter entry? Why?

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It will deter entry....

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-The above figure shows the payoffs to two firms deciding to open a gasoline station in an isolated town.If firm A decides first,what will happen? If there is a $60 fee to enter this market,what will happen? -The above figure shows the payoffs to two firms deciding to open a gasoline station in an isolated town.If firm A decides first,what will happen? If there is a $60 fee to enter this market,what will happen?

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If firm A decides first,it will enter.En...

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-The above figure shows the payoffs to two airlines,A and B,of serving a particular route.Is there a Nash equilibrium? What is it? Explain. -The above figure shows the payoffs to two airlines,A and B,of serving a particular route.Is there a Nash equilibrium? What is it? Explain.

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Firm A entering and firm B not entering ...

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-The above figure shows the payoff to two airlines,A and B,of serving a particular route.If the two airlines must decide simultaneously,how many pure Nash equilibria are there? A) 0 B) 1 C) 2 D) It cannot be determined. -The above figure shows the payoff to two airlines,A and B,of serving a particular route.If the two airlines must decide simultaneously,how many pure Nash equilibria are there?


A) 0
B) 1
C) 2
D) It cannot be determined.

E) B) and C)
F) A) and D)

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-The above figure shows the payoff to two airlines,A and B,of serving a particular route.If the two airlines must decide simultaneously,what happens if the government imposes a $20 per firm tax on firms that service this route? A) Neither firm has a dominant strategy. B) Not entering is a dominant strategy for both firms. C) Neither firm entering is a Nash equilibrium. D) Only firm A will enter. -The above figure shows the payoff to two airlines,A and B,of serving a particular route.If the two airlines must decide simultaneously,what happens if the government imposes a $20 per firm tax on firms that service this route?


A) Neither firm has a dominant strategy.
B) Not entering is a dominant strategy for both firms.
C) Neither firm entering is a Nash equilibrium.
D) Only firm A will enter.

E) All of the above
F) A) and B)

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Suppose market demand is p = 10 - Q.Firms incur no cost of production.If firm A is the incumbent,can it deter the entry of its rival,firm B?

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Firm B's reaction function is qB = 5 - (1...

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-The above figure shows a payoff matrix for two firms,A and B,that must choose between a high-price strategy and a low-price strategy.The Nash equilibrium in this game A) does not exist. B) occurs when both firms set a low price. C) occurs when both firms set a high price. D) occurs when firm A sets a high price and firm B sets a low price. -The above figure shows a payoff matrix for two firms,A and B,that must choose between a high-price strategy and a low-price strategy.The Nash equilibrium in this game


A) does not exist.
B) occurs when both firms set a low price.
C) occurs when both firms set a high price.
D) occurs when firm A sets a high price and firm B sets a low price.

E) All of the above
F) C) and D)

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-The above figure shows the payoff for two firms,A and B,that must each choose to sell either at a high or low price.Determine the dominant strategies for each firm (if any)and the Nash equilibria (if any). -The above figure shows the payoff for two firms,A and B,that must each choose to sell either at a high or low price.Determine the dominant strategies for each firm (if any)and the Nash equilibria (if any).

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For both firms the dominant strategy is ...

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An incumbent's threat to retaliate after a potential competitor enters the market will be taken seriously by potential competitors if


A) the incumbent can still earn a profit after carrying out the threat.
B) the incumbent earns greater profit carrying out the threat than by accommodating entry.
C) the potential entrant cannot earn a profit if the threat is carried out.
D) the potential entrant's profit exceeds the incumbent's if the threat is carried out.

E) B) and D)
F) B) and C)

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