Quiz: Sequential Games

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1.
Under which circumstances would Adams Pizza decide against a marketing campaign?
x = 1mn
x = 2mn
x = 4mn
x = 6mn
x = 7mn
2.
A well-known cinema in town has offered Adams Pizza (A) to make advertisement on their tickets. If
Adams Pizza declines the offer, they will approach As competitor Big Pizza (B) with the same offer.
On the tickets, there is only space for one advertisement campaign. The actions and the
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corresponding payoffs are shown in the game tree below.
What is the Nash Equilibrium in this game?
A: marketing / B: status quo
A: no marketing / B: marketing
A: no marketing / B: no marketing
There is no Nash Equilibrium.
3.
Which of the following statements are correct?
Chess is an example for a sequential game.
In a sequential game the first player can anticipate the reaction of the second player. This can be
considered a first-mover advantage.
Sequential games and simultaneous games have the same rules.
In sequential games, threats are always credible.
Threats always change the outcome of the game.
Sequential games can be solved using backward induction or forward induction.
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4.
Lets get back to the 1970's: At this time, Intel is the only supplier of computer chips to IBM. At the
same time, IBM is exploring the possibility of decreasing this dependency and producing computer
chips on its own. In order to prevent IBM from doing so, Intel promises to decrease its price.
IBM can choose first between continuing to purchase computer chips from Intel and producing them in
an own subsidiary. After that, Intel can choose whether to set a low price or a high price. If IBM opens
its own subsidiary, IBM receives 40mn USD and Intel gets a payoff of 30mn USD. If IBM keeps Intel as
its supplier and Intel sets a high price, then IBM gets a payoff of 10mn USD and Intel makes 90mn
USD. In the case of low prices, IBM and Intel receive 50mn USD each.
Imagine you are the purchasing director of IBM. Would you open your own subsidiary producing
computer chips?
No.
Yes.
5.
Imagine now that Intel invests in a new production facility that increases its production capacity
significantly. In order to utilize their capacity, Intel has to sell high quantities to set low prices. With
charging high prices, Intel would now realize a payoff of 30mn USD (given that IMB doesnt open an
own subsidiary).
As the purchasing director of IBM, would you now open your own subsidiary for computer chips?
No.
Yes.
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