Question

An action that produces the best result, regardless of what other players' decide to do.

a) dominant strategy.

b) optimized strategy.

c) Individualized disequilibrium

d) ultimatum equilibrium.

Question 16

Cartel agreements often fail because of

a) increased profits.

b) increased costs.

c) incentives to cheat.

d) the lack of a dominant strategy.

Answer 1

15. ans A

In game theory, strategic dominance occurs when one strategy is better than another strategy for one player, no matter how that player's opponents may play. Many simple games can be solved using dominance

16. ans C

Game theory is often applied to the costs and benefits of operating a producer cartel - the classic Prisoners' Dilemma suggests that collusion breaks down because there is an incentive for one or more firms to cheat because joint-profit maximization does not mean each firm is maximizing profits on their own.