Reference no: EM13919526

Solution to Q 1, 2 and 12

Q1 (A) What are the ingredients of a simultaneous-move game? Show (using simple examples) how one might propose a "solution" for such games. Comment on the strengths and weaknesses of your solution concept(s).

(B) Document a situation in which game-theoretic analysis explains the out- come, and also a situation in which the outcome deviated from the predic- tion(s). For the second case, why did the prediction fail?

Q2 (A) What does it mean to use "backward induction" or "rollback" to predict the play of a sequential-move game? What (implicit or explicit) assumptions are being made? When is the use of this technique most appropriate?

(B) Document a situation in which backward induction (or rollback) explains the outcome, and also an example of a situation in which the outcome deviated from the prediction. For the second case, why did the prediction fail?

Q3 (A) How might a player use strategic delegation as a method for influencing the behavior of a competitor or other player, or as a method for deterring the entry of a potential competitor? Is it credible?

(B) Find a situation in which one player voluntarily relinquished control to an- other party. Did this help to achieve the objectives of the delegating player?

Q4 (A) In the context of an oligopoly game, what might it mean to have a first-mover advantage or a second-mover advantage? Which is better, and why? How might a player achieve such an advantage? Is a pre-emptive move credible?

(B) Describe a case in which a player either attempted a pre-emptive first move, or tried to wait for the first move of another player. Did this work?

Q5 (A) Is cooperation possible in a one-shot "prisoners' dilemma" style game? What happens if the game is repeated? How might the number of periods of inter- action, the patience of the players, and the frequency of interaction influence the feasible of a cooperative (or collusive) outcome?

(B) Find a real-world case in which one of the factors that influence the feasibil- ity of cooperation or collusion changed. What happened? Were the players able to sustain collusion, and why?

Q6 (A) How might a player "signal his strength" to influence the behavior of another player? What property (or properties) must a signal have to enable its use a credible indication of private information? Can a signal be used to support the credibility of a threat?

(B) Describe one or more examples of signalling. In each case, explain the nature of the private information being signalled, state whether the signal has the required properties, and evaluate whether the signalling strategy worked.

Q7 (A) Consider a "cheap talk" environment: a speaker can say what he likes; a lis- tener is free to interpret as she chooses. Is full communication possible? How might the use of words, terminology, ratings, and grades evolve if speaker and listener have different objectives? Will a richer language ever be used?

(B) Describe a real-world grading or evaluation system. How many categories of evaluations are actually used? Does the use of the system mimic the grading example that we studied in class? Is there any scope for improving the level of communication in your case study?

Q8 (A) In the context of a structured negotiation process, how is a player's final pay- off influenced by: (i) the players' patience levels; (ii) the ability to make the final proposal; (iii) the ability to make the first proposal; (iv) the likelihood of making proposals at any point; (v) the value of a player's existing inside option; and (vi) the availability of any outside options?

(B) Describe a corresponding real-world situation in which structured negotia- tion took place. Evaluate whether the outcome for the negotiators was influ- enced by one or more of the factors mentioned above.

Q9 (A) What are the major forms of auction format for the sale a single object? For buyers who know their valuations for the object, what are the optimal bid- ding strategies? What happens if the auctioneer is procuring (that is, seeking to buy; this is a tendering process) and the bidders are competing sellers?

(B) Describe a real auction or tender process. Explain the rules, including the re- serve price (if any), the number of bidders, and the likely ranges for bidders' valuations. If you were a participant, then what would you do?

Q10 (A) What is the "winner's curse" in an auction? In the context of a simple ascending- price auction, how might bidders adjust their strategies to account for this?

(B) Find and document carefully two real-world situations in which (i) a winner appears to have fallen for the winner's curse; and (ii) bidders seem to have acted cautiously out of a desire to avoid the curse.

Q11 (A) Some games have multiple Nash equilibria. How might coordination be in- fluenced by: (i) the presence of uncertainty about the exact payoffs; (ii) the possible evolution of play over time; and (iii) focal points?

(B) Describe (i) a case in which coordination succeeded; and (ii) a case in which it failed. Do your cases relate to the factors mentioned above?

Q12 (A) How might the performance of an organization evolve when talented team members wish to play for a winning and long-lasting team?

(B) Describe one or two real-world cases in which an organization appears to have transitioned from a winning-team honeymoon to a crisis of confidence.