A conditional strategic move, such as a threat or promise, can be credible only
ID: 1206770 • Letter: A
Question
A conditional strategic move, such as a threat or promise, can be credible only if
a. rivals believe the manager making the threat or promise can be trusted to follow through on any commitment, threat, or promise that he or she makes.
b. the strategic move harms rivals.
c. it can increase each firm’s payoff.
d. when the time comes to carry out the threat or promise, fulfilling the threat or promise is in the best interest of the firm making the threat or promise.
e. none of the above.
30 In a repeated decision for which the present value of the benefits of cheating is less than the present value of the costs of cheating,
a. deciding not to cheat is a value-maximizing decision.
b. deciding to cooperate is a value-maximizing decision.
c. deciding to cheat is a value-maximizing decision.
d. both a and b
31 In the U.S., firms that engage in cooperative efforts to coordinate pricing
are always in violation of antitrust laws.
may face federal charges of illegal collusion if they cannot provide evidence that the coordination of prices was in the best interest of consumers.
are simply trying to reach a Nash equilibrium and are not viewed by courts as necessarily breaking any laws.
both b and c.
32 In a repeated prisoners’ dilemma decision, both managers can make credible threats to punish cheating because
a. if either manager cheats, the other manager can increase its profit by also cheating.
b. both of the cheating cells in the payoff table are strategically stable cells.
c. when both firms cheat, they both avoid the Nash equilibrium cell.
d. both a and c.
Explanation / Answer
Q.29) c. it can increase each firm’s payoff.
Q.30) d. both a and b
Q.31) a. are always in violation of antitrust laws.
q.32) d. both a and c.
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