Monday, December 15, 2008

Final Exams This Week

So this week I commence my final exams (Tuesday and Thursday respectively), and I feel alright...still need to do more studying, but better off now, having studied over the weekend, rather than putting it off last minute like some of my classmates.

Fortunately I have a lot of vacation time that needs to be burned, so I am taking these next three days off to study and better prepare myself. The exams are for Managerial Economics & Public Policy and Leadership & Managing Human Capital.

Overall I am looking forward to taking a break from the semester, and catching up on items that have been slightly neglected, but definitely looking forward to Spring semester, which should be a lot of fun!

Before I close out...I'd like to show below an interesting question on Game Theory (a topic learned this semester and see what answers you might come up with?

1. Golden Cones and Sara's Ice Cream are both trying to decide what kind of ma-
chines to purchase. The profits earned by the two firms in each possible outcome
are listed below with Golden's profits listed first in each cell. Golden is the "row
player" and Sara's is the "column player." G denotes purchase of a gelato machine,
while Y denotes purchase of a yogurt machine.

G 150, 0 150, 300
Y 400, 150 50, 50
Figure 1: Payoff matrix (payoffs are profits in US dollars ($ 1,000))

(a) True or False: G is a dominant strategy for Golden.

(b) True or False: Y is a dominant strategy for Sara.

(c) Suppose the two players make simultaneous purchases. The Nash equilibrium
points of the game are:
i. (G, G) only
ii. (G, Y) only
iii. (Y, G) only
iv. (Y, Y) only
v. (G, Y) and (Y, G)
vi. (G, G) and (Y, Y)

(d) Now suppose that Golden moves first. Golden's equilibrium payoffs will be:

(e) Suppose Golden continues to have the first move. But before their move, they
get a phone call from the management at Sara's who announce that they plan
on purchasing Yogurt machines no matter what.
True or False: Golden should now choose to install a Gelato machine.

(f) Suppose that before Golden moves, the owner of Sara's rearranges his physical
plant in a way that makes the installation of Gelato machines more costly. In
particular, let's assume that Sara's profits from installing Gelato machines fall
by $125,000 due to this maneuver.
True or False: Golden should now choose to install a Gelato machine.


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