What are the key managerial insights derived from game theory? Which one is the most important?
What will be an ideal response?
The key managerial insights that can be derived from game theory include taking advantage of a first-mover advantage and understanding that repetition facilitates cooperation. The behavior of agents can be predicted by knowing the elements of the game: the identity of rivals, the rules of interaction in the game, and the payoffs from actions. The most important of these is the ability to predict the behavior of agents. As a manager, you can make better decisions if you place yourself in the role of a rival in order to anticipate the rival's best response to your actions. Then, use backward induction to choose the most profitable action anticipating the response of your rivals.
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A major side-effect of a stimulative fiscal policy is that it will
A) discriminate in favor of housing. B) crowd out private expenditures. C) increase the natural rate of unemployment. D) permanently raise the rate of inflation.
If the earnings report of a firm indicates higher earnings than was expected by the investors:
a. the stock prices of the firm will decline. b. the price of the product produced by this firm will decline. c. the price of the product produced by this firm will rise. d. the firm will spend more on advertising. e. the stock prices of this firm will increase.
The purchasing power parity theory of exchange rate determination states that
a. in the short run, rates will adjust to parity. b. in the long run, the rate reflects differences in price levels between the two countries. c. in the long run, a government agency sets the rate at parity. d. in the short run, the cost of labor really sets the exchange rate.
Between 1929 and 2009, the U.S. economy grew at an average annual rate of ________
a. 10.4 percent b. 7.9 percent c. 5.2 percent d. 3.3 percent