Quantitative Analysis for Management, 12e (Render)

Module 4 Game Theory

1) Game theory is a way to consider the impact of games on business.

Answer: FALSE
Diff: 2
Topic: INTRODUCTION

2) Game theory has been used to plan warfare strategies.

Answer: TRUE
Diff: 2
Topic: INTRODUCTION

3) Game theory is not very useful during Union negotiations.

Answer: FALSE
Diff: 2
Topic: INTRODUCTION

4) The cornerstone of game theory is Harsanui equilibrium and Harsanui bargaining

problems.
Answer: FALSE
Diff: 2
Topic: INTRODUCTION

5) Game models are classified by the number of players, the maximum payoffs, and the
likelihood of each outcome.
Answer: FALSE
Diff: 2
Topic: INTRODUCTION

6) In a zero-sum game, what one player gains is lost by the other.

Answer: TRUE
Diff: 2
Topic: INTRODUCTION

7) In a competitive business market, one company's strategy might be to minimize its

potential losses.
Answer: TRUE
Diff: 2
Topic: THE MINIMAX CRITERION

8) In a competitive business market, one company's strategy might be to maximize its

minimum profits.
Answer: TRUE
Diff: 2
Topic: THE MINIMAX CRITERION

9) The minimax criterion is equivalent to maximizing one's minimum gains.

Answer: TRUE
Diff: 2
Topic: THE MINIMAX CRITERION

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10) Minimizing one's maximum losses is identical to maximizing one's minimum gains.
Answer: TRUE
Diff: 2
Topic: THE MINIMAX CRITERION

11) The upper value of the game is selected as the minimum of the maximum numbers in a
column.
Answer: TRUE
Diff: 2
Topic: THE MINIMAX CRITERION

12) The lower value of the game is selected as the maximum of the minimum numbers in a
row.
Answer: TRUE
Diff: 2
Topic: THE MINIMAX CRITERION

13) If the upper value of the game is larger than the lower value of the game, a saddle
point condition exists.
Answer: FALSE
Diff: 2
Topic: THE MINIMAX CRITERION

14) The value of a two-person pure strategy game is equal to the lower value of the game.
Answer: TRUE
Diff: 2
Topic: PURE STRATEGY GAMES

15) When there is no saddle point, the game is a mixed strategy game.
Answer: TRUE
Diff: 2
Topic: MIXED STRATEGY GAMES

16) Dominance increases the size of games by allowing additional strategies to be

considered.
Answer: FALSE
Diff: 2
Topic: DOMINANCE

17) Game theory is the study of

A) how optimal strategies are formulated in conflict.
B) decisions and their consequences.
C) pure probability.
D) conditional probability.
E) None of the above
Answer: A
Diff: 2
Topic: INTRODUCTION

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18) The saddle point in a payoff matrix is always the
A) largest number in its column and the largest number in its row.
B) largest number in its column and the smallest number in its row.
C) smallest number in its column and the largest number in its row.
D) smallest number in its column and the smallest number in its row.
E) None of the above
Answer: B
Diff: 2
Topic: THE MINIMAX CRITERION

19) The minimax criterion is to

A) minimize one's maximum losses.
B) maximize one's maximum losses.
C) maximize one's minimum gains.
D) minimize one's minimum gains.
E) Both A and C are correct
Answer: E
Diff: 2
Topic: THE MINIMAX CRITERION

20) Consider the following two-person game. The payoff for X is given in the table. X will
always play strategy

Y1 Y2
X1 4 6
X2 1 -3
A) X1.
B) X2.
C) Y1.
D) Y2.
E) Not enough information given
Answer: A
Diff: 2
Topic: THE MINIMAX CRITERION
AACSB: Analytic Skills

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21) Consider the following two-person game, and determine the saddle point if it exists.

Y1 Y2
X1 4 6
X2 2 -3
A) -3
B) 2
C) 4
D) 6
E) There is no saddle point
Answer: C
Diff: 2
Topic: THE MINIMAX CRITERION
AACSB: Analytic Skills

22) CleanClothes dry cleaners is opening a pick-up and delivery service. There is only one
other dry cleaner that currently offers this service. To advertise, CleanClothes is
considering either newspaper ads or attaching flyers to the doors of many local homes. The
payoff for each of CleanClothes' potential strategies is given in the table below. What
strategy will CleanClothes (X) play?

Y1 (newspaper ads) Y2 (flyers)

X1 (newspaper ads) 52 37
X2 (flyers) 26 18
A) X1
B) X2
C) Y1
D) Y2
E) Not enough information given
Answer: A
Diff: 2
Topic: THE MINIMAX CRITERION
AACSB: Analytic Skills

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23) CleanClothes dry cleaners is opening a pick-up and delivery service. There is only one
other dry cleaner that currently offers this service. To advertise, CleanClothes is
considering either newspaper ads or attaching flyers to the doors of many local homes. The
payoff for each of CleanClothes' potential strategies is given in the table below. What
strategy will the existing dry cleaners (Y) play?

Y1 (newspaper ads) Y2 (flyers)

X1 (newspaper ads) 52 37
X2 (flyers) 26 18
A) X1
B) X2
C) Y1
D) Y2
E) Not enough information given
Answer: D
Diff: 2
Topic: THE MINIMAX CRITERION
AACSB: Analytic Skills

24) CleanClothes dry cleaners is opening a pick-up and delivery service. There is only one
other dry cleaner that currently offers this service. To advertise, CleanClothes is
considering either newspaper ads or attaching flyers to the doors of many local homes. The
payoff for each of CleanClothes' potential strategies is given in the table below. What is the
saddle point, if any, of this game?

Y1 (newspaper ads) Y2 (flyers)

X1 (newspaper ads) 52 37
X2 (flyers) 26 18
A) 37
B) 17
C) 16
D) 8
E) There is no saddle point
Answer: A
Diff: 2
Topic: THE MINIMAX CRITERION
AACSB: Analytic Skills

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25) Bagles RUS is expanding into a high-growth suburban area. To promote business and
lure customers from the competing Wer Bagel store, they are considering offering a free
dozen bagels to the first 50 customers or radio advertisement. The payoff for Bagels RUS is
given in the table below. What is Bagels RUS' (X) best strategy?

Y1 Y2
X1 3 6
X2 2 -2
A) X1
B) X2
C) Y1
D) Y2
E) None of the above
Answer: A
Diff: 2
Topic: THE MINIMAX CRITERION
AACSB: Analytic Skills

26) Bagles RUS is expanding into a high-growth suburban area. To promote business and
lure customers from the competing Wer Bagel store, they are considering offering a free
dozen bagels to the first 50 customers or radio advertisement. The payoff for Bagels RUS is
given in the table below. What is Wer Bagels' (Y) best strategy?

Y1 Y2
X1 3 6
X2 2 -2
A) X1
B) X2
C) Y1
D) Y2
E) None of the above
Answer: C
Diff: 2
Topic: THE MINIMAX CRITERION
AACSB: Analytic Skills

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27) Bagles RUS is expanding into a high-growth suburban area. To promote business and
lure customers from the competing Wer Bagel store, they are considering offering a free
dozen bagels to the first 50 customers or radio advertisement. The payoff for Bagels RUS is
given in the table below. What is the saddle point, if any, for the bagel stores?

Y1 Y2
X1 3 6
X2 2 -2
A) 3
B) 6
C) 2
D) -2
E) There is no saddle point
Answer: A
Diff: 2
Topic: THE MINIMAX CRITERION
AACSB: Analytic Skills

28) In a two-person, zero sum game,

A) the sum of losses equals zero.
B) the sum of gains equals zero.
C) the sum of losses for one player must equal the sum of gains for the other player.
D) None of the above
Answer: C
Diff: 2
Topic: INTRODUCTION

29) The value of a mixed strategy game is

A) the maximum outcome of the game.
B) the minimum outcome of the game.
C) the outcome of the game played once.
D) the average outcome of the game played an infinite number of times.
E) None of the above
Answer: D
Diff: 2
Topic: MIXED STRATEGY GAMES

30) If it is known what percentage of the time each player plays each strategy, then the
value of a two-person game can be computed
A) from only the optimal strategy row.
B) from only the optimal strategy column.
C) from any column or row.
D) except for a zero sum game.
E) None of the above
Answer: C
Diff: 2
Topic: MIXED STRATEGY GAMES

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31) Considering the following two-person game, what percentage of the time should X play
strategy X2?

Y1 Y2
X1 6 3
X2 2 8
A) 1/3
B) 2/3
C) 4/9
D) 5/9
E) None of the above
Answer: A
Diff: 2
Topic: MIXED STRATEGY GAMES
AACSB: Analytic Skills

32) Considering the following two-person game, what percentage of the time should Y play
strategy Y1?

Y1 Y2
X1 6 3
X2 2 8
A) 1/3
B) 2/3
C) 4/9
D) 5/9
E) None of the above
Answer: D
Diff: 2
Topic: MIXED STRATEGY GAMES
AACSB: Analytic Skills

33) Considering the following two-person game, the value of the game (if played many
times) is

Y1 Y2
X1 6 3
X2 2 8
A) 19.00.
B) 4.75.
C) 4.67.
D) Unable to be computed, as the α was not given.
Answer: C
Diff: 2
Topic: MIXED STRATEGY GAMES
AACSB: Analytic Skills

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34) The value of the following game is 2.5. Therefore,

Y1 Y2
X1 3 2
X2 -1 6
A) X1 will gain 2.5 points.
B) X2 will gain 2.5 points.
C) X will gain 2.5 points.
D) Y will gain 2.5 points.
E) None of the above
Answer: C
Diff: 2
Topic: LANGUAGE OF GAMES

35) Given the following two-person game, which strategy can be eliminated by use of
dominance?

Y1 Y2
X1 13 9
X2 6 8
X3 12 14
A) X1
B) X2
C) X3
D) Y1
E) Y2
Answer: B
Diff: 2
Topic: DOMINANCE
AACSB: Analytic Skills

36) Given the following two-person game, what strategy should the players play?

Y1 Y2
X1 15 20
X2 8 4
Answer: This is a pure strategy. X should play X1 and Y should play Y1.
Diff: 2
Topic: PURE STRATEGY GAMES
AACSB: Analytic Skills

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37) What is the value of the following two-person game?

Y1 Y2
X1 15 20
X2 8 4
Answer: This is a pure strategy with value 15.
Diff: 2
Topic: PURE STRATEGY GAMES
AACSB: Analytic Skills

38) Given the following two-person game, what strategy should the players play?

Y1 Y2
X1 6 2
X2 -4 1
Answer: This is a pure strategy. X should play X1 and Y should play Y2.
Diff: 2
Topic: PURE STRATEGY GAMES
AACSB: Analytic Skills

39) What is the value of the following two-person game?

Y1 Y2
X1 6 2
X2 -4 7
Answer: The value is 3.33
Diff: 2
Topic: PURE STRATEGY GAMES
AACSB: Analytic Skills

40) Given the following two-person game, what strategy should the players play?

Y1 Y2
X1 12 16
X2 14 8
Answer: This is a mixed strategy.
12Q + 14(1 - Q) = 16Q + 8(1 - Q) ==> Q = 3/5
12P + 16(1 - P) = 14P + 8(1 - P) ==> P = 4/5
Diff: 2
Topic: MIXED STRATEGY GAMES
AACSB: Analytic Skills

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41) Given the following two-person game, what strategy should the players play?

Y1 Y2
X1 6 -2
X2 -1 4
Answer: This is a mixed strategy.
6Q - (1 - Q) = -2Q + 4(1 - Q) ==> Q = 5/13
6P - 2(1 - P) = -P + 4(1 - P) ==> P = 6/13
Diff: 2
Topic: MIXED STRATEGY GAMES
AACSB: Analytic Skills

42) List at least two game theory applications.

Answer: war, negotiations, business
Diff: 2
Topic: INTRODUCTION

43) The cornerstone of modern game theory includes the concepts developed by this
person.
Answer: John Nash
Diff: 2
Topic: INTRODUCTION

44) Describe a two-person zero sum game.

Answer: a game of two contestants in which the sum of gains of one player equals the sum
of losses of the other player
Diff: 2
Topic: INTRODUCTION

45) What is meant by a mixed strategy game?

Answer: a game in which there is no saddle point
Diff: 2
Topic: MIXED STRATEGY GAMES

46) What is meant by the value of a mixed strategy game?

Answer: the average or expected game outcome if the game is played an infinite number of
times
Diff: 2
Topic: MIXED STRATEGY GAMES

47) Explain the principle of dominance as used in game theory.

Answer: used to eliminate strategies that would not ever be played
Diff: 2
Topic: DOMINANCE

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