Problem Set 05
1) Game theory addresses decision situations with two or more decision makers in competition.
Answer: TRUE
Diff: 1
Main Heading: Game Theory
Key words: game theory
2) Game theory addresses decision situations with two or less decision makers in competition.
Answer: FALSE
Diff: 1
Main Heading: Game Theory
Key words: game theory
3) A two-person game encompasses two players.
Answer: TRUE
Diff: 1
Main Heading: Types of Game Situations
Key words: two-person game
4) In a zero-sum game, one player's gains represent another's exact losses.
Answer: TRUE
Diff: 2
Main Heading: Types of Game Situations
Key words: zero-sum game
5) In a game situation, it is assumed that the payoff table is known to all players.
Answer: TRUE
Diff: 2
Main Heading: Types of Game Situations
Key words: payoff table
6) A strategy is a plan of action followed by a player.
Answer: TRUE
Diff: 2
Main Heading: Types of Game Situations
Key words: strategy
7) In a strategy it is assumed that the payoff table is known to all players.
Answer: FALSE
Diff: 2
Main Heading: Types of Game Situations
Key words: strategy, payoff table
1
8) The value of the game is the offensive player's gain and the defensive player's loss in a zero-
sum game.
Answer: TRUE
Diff: 2
Main Heading: Types of Game Situations
Key words: value of the game
9) The value of the game is the defensive player's gain and the offensive player's loss in a zero-
sum game.
Answer: FALSE
Diff: 2
Main Heading: Types of Game Situations
Key words: value of the game
10) The best strategy for each player is his or her optimal strategy.
Answer: TRUE
Diff: 1
Main Heading: Types of Game Situations
Key words: strategy
11) The payoffs for a mixed strategy game assumes that the game is played exactly one time.
Answer: FALSE
Diff: 1
Main Heading: Types of Game Situations
Key words: mixed strategy
12) The payoffs for a mixed strategy game assumes that the game is played many times.
Answer: TRUE
Diff: 2
Main Heading: Types of Game Situations
Key words: mixed strategy
13) In a mixed strategy game, players switch decision in response to the other player.
Answer: TRUE
Diff: 1
Main Heading: Types of Game Situations
Key words: mixed strategy
14) In a pure strategy game, each player adopts a single strategy as an optimal strategy.
Answer: TRUE
Diff: 1
Main Heading: A Pure Strategy
Key words: pure strategy game
2
15) With the minimax criterion, each player seeks to minimize maximum possible losses.
Answer: TRUE
Diff: 2
Main Heading: A Pure Strategy
Key words: minimax criterion
16) A point of equilibrium is a value that is simultaneously the minimum of a row and the
maximum of a column.
Answer: TRUE
Diff: 1
Main Heading: A Pure Strategy
Key words: pure strategy, equilibrium point
17) A point of equilibrium is a value that is simultaneously the maximum of a row and the
minimum of a column.
Answer: FALSE
Diff: 1
Main Heading: A Pure Strategy
Key words: pure strategy, equilibrium point
18) In a __________ game one player's gains represent another player's exact losses.
Answer: zero-sum
Diff: 1
Key words: zero-sum game
19) A __________ is a plan of action followed by a player.
Answer: strategy
Diff: 2
Key words: game theory, strategy
20) In a __________ game each player adopts a single strategy as an optimal strategy.
Answer: pure strategy
Diff: 1
Key words: pure strategy game
21) A __________ game occurs when each player selects an optimal strategy that does not result
in an equilibrium point when the minimax criterion is used.
Answer: mixed strategy
Diff: 2
Key words: mixed strategy game
3
22) In a pure strategy game the optimal strategy for each player results in the same payoff, called
an __________ point.
Answer: equilibrium or saddle
Diff: 2
Key words: pure strategy game, equilibrium point
23) In a(n) __________ game, players switch decisions in response to the decision of the other
player and eventually return to the initial decisions, resulting in a closed loop.
Answer: mixed strategy
Diff: 2
Key words: mixed strategy game
24) In the expected __________ method, a plan of strategies is determined by each player so that
expected gain of one equals the expected loss of the other.
Answer: gain and loss
Diff: 2
Key words: expected gain and loss method
25) A strategy is __________ and can be eliminated if all its payoffs are worse than the
corresponding payoffs for another strategy.
Answer: dominated
Diff: 2
Key words: dominating strategies
26) In game theory, each player seeks to minimize maximum possible losses with the
__________ criterion.
Answer: minimax
Diff: 2
Key words: minimax criterion
27) A pure strategy game can be solved according to the __________ criterion.
Answer: minimax
Diff: 1
Key words: minimax
28) A __________ occurs when the optimal strategy for each player results in the same payoff.
Answer: equilibrium or saddle point
Diff: 2
Key words: pure strategy, equilibrium point
29) The __________ method uses probabilities to determine the best strategy for each player.
Answer: gain and loss
Diff: 2
Key words: expected gain and loss method
4
30) The __________ for a mixed strategy game assumes that the game is played many times.
Answer: payoffs
Diff: 2
Key words: mixed strategy, payoff
31) Given the following payoff table:
A B
1 20 10
2 4 15
What is the value of the game?
Answer: 12.38
Diff: 2
Main Heading: A Mixed Strategy
Key words: mixed strategy
32) s1 s2 s3
d1 10 8 6
d2 14 15 2
d3 7 8 9
What decision should be made by the optimistic decision maker?
Answer: D2
Diff: 3
Main Heading: A Mixed Strategy
Key words: maximax criterion
33) s1 s2 s3
d1 10 8 6
d2 14 15 2
d3 7 8 9
What decision should be made by the conservative decision maker?
Answer: D3
Diff: 3
Main Heading: A Mixed Strategy
Key words: maximin criterion
5
34) s1 s2 s3
d1 10 8 6
d2 14 15 2
d3 7 8 9
What decision should be made under minimax regret?
Answer: 3-way tie
Diff: 3
Main Heading: A Mixed Strategy
Key words: minimax regret criterion
35) s1 s2 s3
d1 10 8 6
d2 14 15 2
d3 7 8 9
If the probabilities of s1, s2, and s3 are 0.2, 0.4, and 0.4, respectively, then what decision should
be made under expected value?
Answer:
Ev(d1)=7.6
Ev(d2)=9.6 (best)
Ev(d3)=8.2
Diff: 3
Main Heading: A Mixed Strategy
Key words: expected value criterion
36) s1 s2 s3
d1 250 750 500
d2 300 -250 1200
d3 500 500 600
What decision should be made by the conservative decision maker?
Answer: D3
Diff: 3
Main Heading: A Mixed Strategy
Key words: maximin criterion
6
37) s1 s2 s3
d1 250 750 500
d2 300 -250 1200
d3 500 500 600
What decision should be made under minimax regret?
Answer: D3
Diff: 3
Main Heading: A Mixed Strategy
Key words: minimax criterion
38) s1 s2 s3
d1 250 750 500
d2 300 -250 1200
d3 500 500 600
If the probabilities of d1, d2, and d3 are 0.2, 0.5, and 0.3, respectively, then what decision should
be made under expected value?
Answer:
Ev(d1)=575 (best)
Ev(d2)=295
Ev(d3)=530
Diff: 3
Main Heading: A Mixed Strategy
Key words: expected value criterion
39) The local operations manager for the IRS must decide whether to hire one, two, or three
temporary workers. He estimates that net revenues will vary with how well taxpayers comply
with the new tax code.
If he uses the maximin criterion, how many new workers will he hire?
Answer: 1
Diff: 2
Main Heading: A Mixed Strategy
Key words: maximin criterion
7
40) The local operations manager for the IRS must decide whether to hire one, two, or three
temporary workers. He estimates that net revenues will vary with how well taxpayers comply
with the new tax code.
If he uses the minimax regret criterion, how many new workers will he hire?
Answer: 2
Diff: 2
Main Heading: A Mixed Strategy
Key words: minimax regret criterion
41) The local operations manager for the IRS must decide whether to hire one, two, or three
temporary workers. He estimates that net revenues will vary with how well taxpayers comply
with the new tax code.
If he thinks the chances of low, medium, and high compliance are 20%, 30%, and 50%
respectively, what are the expected net revenues for the number of workers he will decide to
hire?
Answer: hire 1 worker (50 > 48 > 46) net revenue = $50
Diff: 2
Main Heading: A Mixed Strategy
Key words: expected value criterion
8
42) Mary Schultz is the incumbent Senator from Ohio and John Henderson is her opponent in the
upcoming election. Since Mr. Henderson is seeking to unseat Ms. Schultz, he is on the offensive,
while Ms. Schultz hopes to minimize his gains or her losses in the election. The following payoff
table shows the various percentage point gains/losses in the polls for the two candidates based on
their selection of certain political strategies.
Use the expected gain and loss method and determine the probability that each strategy will be
used by each player.
Answer:
Probability that John Henderson uses strategy 1 is 50%
Probability that John Henderson uses strategy 2 is 50%
Probability that Mary Schultz uses strategy A is 87.5%
Probability that Mary Schultz uses strategy B is 12.5%
Diff: 3
Main Heading: A Mixed Strategy
Key words: mixed strategy
43) Mary Schultz is the incumbent Senator from Ohio and John Henderson is her opponent in the
upcoming election. Since Mr. Henderson is seeking to unseat Ms. Schultz, he is on the offensive,
while Ms. Schultz hopes to minimize his gains or her losses in the election. The following payoff
table shows the various percentage point gains/losses in the polls for the two candidates based on
their selection of certain political strategies.
Use the expected gain and loss method and determine the equilibrium point.
Answer: 6.5
Diff: 3
Main Heading: A Mixed Strategy
Key words: expected gain and loss method, equilibrium point, mixed strategy
9
44) Mary Schultz is the incumbent Senator from Ohio and John Henderson is her opponent in the
upcoming election. Since Mr. Henderson is seeking to unseat Ms. Schultz, he is on the offensive,
while Ms. Schultz hopes to minimize his gains or her losses in the election. The following payoff
table shows the various percentage point gains/losses in the polls for the two candidates based on
their selection of certain political strategies.
Determine the optimal strategy and the optimal payoff for both players.
Answer: John, strategy 2, Mary strategy A and the optimal payoff = 6
Diff: 2
Main Heading: A Mixed Strategy
Key words: pure strategy
45) Given the following payoff/loss table for a mixed strategy game between two players:
Identify dominated strategy(s), if it (they) exist(s).
Answer: B dominates A, B dominates D, 2 dominates 4
Diff: 2
Main Heading: A Mixed Strategy
Key words: dominating strategies
46) Construct the payoff matrix for the game, "rock, paper, scissors" for 2 players, A and B.
Assume that "paper covers rock", "rock breaks scissors," and "scissors cut paper." If player A
wins, assign +1. If player A loses, assign -1.
Answer:
Diff: 1
Main Heading: A Mixed Strategy
Key words: payoff matrix
10
47) Two companies are about to make a decision regarding an investment in a new promotional
campaign. Company A will either advertise in all media or advertise in newspapers only.
Company B will either run a sweepstake or run a big sale. The payoff matrix is shown below.
Determine the proportion of time that each company should employ each strategy.
Answer: Company A: Adopt A1 strategy 3/8 of the time and alternative A2 5/8 of the time.
Company B: Adopt B1 25% of the time and B2 75% of the time.
Diff: 2
Main Heading: A Mixed Strategy
Key words: mixed strategy, expected gain/loss method, equilibrium point
48) Two companies are about to make a decision regarding an investment in a new promotional
campaign. Company A will either advertise in all media or advertise in newspapers only.
Company B will either run a sweepstake or run a big sale. The payoff matrix is shown below.
Determine the value of the game.
Answer: 0.25
Diff: 2
Main Heading: A Mixed Strategy
Key words: mixed strategy, value of the game
11
49) In order to attract listeners, a radio station gives away money if listeners correctly identify
the amount of money found by a "treasure hunter". A contestant would guess the amount on the
air, and the disc jockey would then play a tape in which the "treasure hunter" said how much he
had found. If the caller guessed correctly, they won the amount of money found by the treasure
hunter. If they guessed incorrectly, they received nothing. Suppose that the treasure hunter either
found $50 or $100. The payoff matrix represents this game:
If the station plans on running the game every day for 10 days, how much will they pay out?
Answer: value of the game is $33.33 per game, for $333.33 for the ten day period
Diff: 2
Main Heading: A Mixed Strategy
Key words: mixed strategy, value of the game
50) In a zero sum game one player's gains represent another's exact __________.
A) gains
B) losses
C) gains and losses
D) gains or losses
Answer: B
Diff: 2
Main Heading: Game Theory
Key words: zero-sum game
51) The __________ is the offensive player's gain and the defensive player's loss in a zero-sum
game.
A) game situation
B) value of the game
C) strategy
D) best strategy
E) pure strategy
Answer: B
Diff: 2
Main Heading: Game Theory
Key words: value of the game
12
52) A __________ is a plan of action followed by a player.
A) game situation
B) strategy
C) value of the game
D) best strategy
E) pure strategy
Answer: B
Diff: 2
Main Heading: Game Theory
Key words: strategy
53) Game theory assumes that players behave:
A) logically
B) emotionally
C) rationally
D) A, B, and C
E) A and B
Answer: E
Diff: 2
Main Heading: Game Theory
Key words: game theory assumptions
54) The __________ criterion results in the maximum of the minimum payoffs.
A) minimax
B) maximax
C) maximin
D) minimin
Answer: C
Diff: 2
Main Heading: Game Theory
Key words: maximin criterion
55) Regret is the difference between the payoff from the
A) best decision and all other decision payoffs
B) worst decision and all other decision payoffs
C) best decision and the worst decision payoffs
D) none of the above.
Answer: A
Diff: 2
Main Heading: Game Theory
Key words: regret, minimax regret criterion
13
56) Determining the worst payoff for each alternative and choosing the alternative with the best
of the worst payoffs is called a __________ criterion.
A) maximin
B) minimin
C) maximax
D) minimax
Answer: A
Diff: 3
Main Heading: Game Theory
Key words: maximin criterion
57) The maximin approach to decision making refers to
A) minimizing the maximum return
B) maximizing the minimum return
C) maximizing the maximum return
D) minimizing the minimum return
Answer: B
Diff: 3
Main Heading: Game Theory
Key words: maximin criterion
58) With the __________ criterion each player seeks to minimize maximum possible losses.
A) minimax
B) maximax
C) minimin
D) maximin
Answer: A
Diff: 1
Main Heading: Game Theory
Key words: minimax criterion
59) A tabular presentation that shows the outcome for each decision alternative under the various
possible states of nature is called a __________.
A) decision tree
B) payoff table
C) feasible region
D) payback matrix
Answer: B
Diff: 2
Main Heading: A Mixed Strategy
Key words: payoff table
14
60) The expected value and expected opportunity loss criteria result in __________.
A) the same decision
B) different decisions
C) similar decisions
D) all of the above
Answer: A
Diff: 1
Main Heading: A Mixed Strategy
Key words: expected value criterion, expected opportunity loss criterion
61) A(n) __________ game occurs when each player selects an optimal strategy that does not
result in an equilibrium point when the minimax criterion is used.
A) optimal strategy
B) pure strategy
C) mixed strategy
D) best strategy
Answer: C
Diff: 2
Main Heading: A Mixed Strategy
Key words: mixed strategy
62) Two companies are about to make a decision regarding an investment in a new promotional
campaign. Company A will either advertise in all media or advertise in newspapers only.
Company B will either run a sweepstake or run a big sale. The payoff matrix is shown below.
Determine the proportion of time that Company A should employ each strategy.
A) A1: 12.5%, A2: 87.5%
B) A1: 25%, A2: 75%
C) A1: 37.5%, A2: 62.5%
D) A1: 50%, A2: 50%
E) A1: 62.5%, A2: 37.5%
Answer: C
Diff: 2
Main Heading: A Mixed Strategy
Key words: mixed strategy, expected gain/loss method, equilibrium point
15
63) Two companies are about to make a decision regarding an investment in a new promotional
campaign. Company A will either advertise in all media or advertise in newspapers only.
Company B will either run a sweepstake or run a big sale. The payoff matrix is shown below.
Determine the proportion of time that Company B should employ each strategy.
A) B1: 12.5%, B2: 87.5%
B) B1: 25%, B2: 75%
C) B1: 37.5%, B2: 62.5%
D) B1: 50%, B2: 50%
E) B1: 62.5%, B2:37.5%
Answer: B
Diff: 2
Main Heading: A Mixed Strategy
Key words: mixed strategy, expected gain/loss method, equilibrium point
64) In order to attract listeners, a radio station gives away money if listeners correctly identify
the amount of money found by a "treasure hunter". A contestant would guess the amount on the
air, and the disc jockey would then play a tape in which the "treasure hunter" said how much he
had found. If the caller guessed correctly, they won the amount of money found by the treasure
hunter. If they guessed incorrectly, they received nothing. Suppose that the treasure hunter either
found $50 or $100. The payoff matrix represents this game:
If the station plans on running the game every day for 10 days, how much will they pay out?
A) $250
B) $333
C) $500
D) $750
E) $667
Answer: B
Diff: 2
Main Heading: A Mixed Strategy
Key words: mixed strategy, value of the game
16
