Game Theory for Strategic Advantage
Final Assessment Review
(Questions & Solutions)
2025
1
, Question 1:
Which of the following best defines a strategic (normal‑form) game?
A. A game where players choose actions sequentially with complete
historical knowledge
B. A representation in which each player chooses an action
simultaneously and payoffs depend on the combination of all actions
C. A game with perfect information where every move is known
D. A game that excludes any consideration of risk and uncertainty
Correct ANS: B
Rationale:
A strategic or normal‑form game represents a situation in which players
choose their actions simultaneously (or without knowing others’ choices)
and each player’s payoff depends on the combination of actions selected
by all players.
---
Question 2:
In the context of game theory, a Nash equilibrium is defined as:
A. A set of strategies where each player is playing a best response to the
strategies of the others
B. The outcome where one firm dominates all competitors
C. A solution concept that only exists in zero‑sum games
D. The strategy that yields maximum profit for one player regardless of
what opponents do
Correct ANS: A
Rationale:
A Nash equilibrium occurs when, given the other players’ strategies, no
player can improve their payoff by unilaterally changing their own
strategy.
2
,---
Question 3:
Which statement correctly distinguishes between pure and mixed
strategies?
A. Pure strategies involve randomizing over possible actions, while mixed
strategies do not
B. In pure strategies, a player chooses a single action, whereas in mixed
strategies the player randomizes over more than one action
C. Mixed strategies are only applicable in cooperative games
D. Pure strategies cannot be part of a Nash equilibrium
Correct ANS: B
Rationale:
A pure strategy selects one specific action consistently, while a mixed
strategy assigns probabilities to different actions. Nash’s famous
existence theorem guarantees that every finite game has at least one
Nash equilibrium in mixed strategies, even if no pure strategy equilibrium
exists.
---
Question 4:
In the classic Prisoner’s Dilemma, the dominant strategy for both players
is to:
A. Cooperate
B. Defect
C. Randomize between cooperation and defection
D. Choose a strategy depending on the opponent’s previous move
Correct ANS: B
Rationale:
In the Prisoner’s Dilemma each player finds that defecting is a dominant
strategy because it yields a higher (or less negative) outcome irrespective
of the other’s choice, even though mutual cooperation would have
3
, produced a collectively better result.
---
Question 5:
What is subgame perfect equilibrium (SPE) best described as?
A. Nash equilibrium that holds in every subgame of a dynamic
(sequential) game
B. An outcome of a static game with incomplete information
C. A concept used exclusively in repeated games
D. The equilibrium reached by eliminating strictly dominated strategies
only
Correct ANS: A
Rationale:
Subgame perfect equilibrium refines Nash equilibrium for extensive‑form
games by requiring that the strategy profile specifies an equilibrium in
every subgame, ensuring credibility of strategies at every decision node.
---
Question 6:
Which method is used to solve a finite sequential game with perfect
information?
A. Forward induction
B. Backward induction
C. Simultaneous move analysis
D. Sensitivity analysis
Correct ANS: B
Rationale:
Backward induction involves solving the game from the final nodes
backward to the initial decision point and is the standard technique for
solving finite sequential games with perfect information.
4
Final Assessment Review
(Questions & Solutions)
2025
1
, Question 1:
Which of the following best defines a strategic (normal‑form) game?
A. A game where players choose actions sequentially with complete
historical knowledge
B. A representation in which each player chooses an action
simultaneously and payoffs depend on the combination of all actions
C. A game with perfect information where every move is known
D. A game that excludes any consideration of risk and uncertainty
Correct ANS: B
Rationale:
A strategic or normal‑form game represents a situation in which players
choose their actions simultaneously (or without knowing others’ choices)
and each player’s payoff depends on the combination of actions selected
by all players.
---
Question 2:
In the context of game theory, a Nash equilibrium is defined as:
A. A set of strategies where each player is playing a best response to the
strategies of the others
B. The outcome where one firm dominates all competitors
C. A solution concept that only exists in zero‑sum games
D. The strategy that yields maximum profit for one player regardless of
what opponents do
Correct ANS: A
Rationale:
A Nash equilibrium occurs when, given the other players’ strategies, no
player can improve their payoff by unilaterally changing their own
strategy.
2
,---
Question 3:
Which statement correctly distinguishes between pure and mixed
strategies?
A. Pure strategies involve randomizing over possible actions, while mixed
strategies do not
B. In pure strategies, a player chooses a single action, whereas in mixed
strategies the player randomizes over more than one action
C. Mixed strategies are only applicable in cooperative games
D. Pure strategies cannot be part of a Nash equilibrium
Correct ANS: B
Rationale:
A pure strategy selects one specific action consistently, while a mixed
strategy assigns probabilities to different actions. Nash’s famous
existence theorem guarantees that every finite game has at least one
Nash equilibrium in mixed strategies, even if no pure strategy equilibrium
exists.
---
Question 4:
In the classic Prisoner’s Dilemma, the dominant strategy for both players
is to:
A. Cooperate
B. Defect
C. Randomize between cooperation and defection
D. Choose a strategy depending on the opponent’s previous move
Correct ANS: B
Rationale:
In the Prisoner’s Dilemma each player finds that defecting is a dominant
strategy because it yields a higher (or less negative) outcome irrespective
of the other’s choice, even though mutual cooperation would have
3
, produced a collectively better result.
---
Question 5:
What is subgame perfect equilibrium (SPE) best described as?
A. Nash equilibrium that holds in every subgame of a dynamic
(sequential) game
B. An outcome of a static game with incomplete information
C. A concept used exclusively in repeated games
D. The equilibrium reached by eliminating strictly dominated strategies
only
Correct ANS: A
Rationale:
Subgame perfect equilibrium refines Nash equilibrium for extensive‑form
games by requiring that the strategy profile specifies an equilibrium in
every subgame, ensuring credibility of strategies at every decision node.
---
Question 6:
Which method is used to solve a finite sequential game with perfect
information?
A. Forward induction
B. Backward induction
C. Simultaneous move analysis
D. Sensitivity analysis
Correct ANS: B
Rationale:
Backward induction involves solving the game from the final nodes
backward to the initial decision point and is the standard technique for
solving finite sequential games with perfect information.
4
