1.Firms make credible commitments by taking _________________, _______________ a
ID: 1224434 • Letter: 1
Question
1.Firms make credible commitments by taking _________________, _______________ actions.
a.irreversible, unconditional
b.reversible, uncontrollable
c.reversible, believable
d.costly, but believable
e.costly, reversible
2.In simultaneous decision making situations, common knowledge means that
a.at least one of the decision makers knows what is going to happen.
b.all of the decision makers know precisely what decisions/strategies will be chosen by each one of their rivals.
c.even people not involved in making the decision will be able predict the outcome.
d.the managers of the firms failed to keep all of the information about their decision plans secret.
e.none of the above
3.A conditional strategic move, such as a threat or promise, can be credible only if
a. 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.
b. rivals believe the manager making the threat or promise can be trusted to follow through on any threat, or promise that he or she makes.
c. the strategic move harms rivals.
d. it can increase each firm’s payoff.
e. none of the above.
Explanation / Answer
1. Ans: .irreversible, unconditional
Explanation: Restricting self-interested choice to boost beneficial actions from other players is called credible commitment. To achieve the desired result, the commitment should be credible and to be credible, the commitment should be irreversible and unconditional. It is required to stop the first move in a strategic decision.
2. Ans: none of the above
Explanation: Common Knowledge is a situation in which all decision makers know the payoff table, and they believe all other decision makers also know the payoff table.
3. Ans: 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.
Explanation: To be credible, the threatened or promised action must be the best action to take when the time comes to make good on the threat or promise.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.