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Quizzes > Social & Behavioral Sciences

Game Theory Quiz

Free Practice Quiz & Exam Preparation

Difficulty: Moderate
Questions: 15
Study OutcomesAdditional Reading
3D voxel art illustrating Game Theory course concepts and strategies

Use this Game Theory quiz to practice core ideas in strategic choice - Nash equilibrium, dominance, voting, bargaining, auctions, and adverse selection - with examples in economics, politics, and daily life. Work through 15 quick questions at your own pace to spot gaps early and build exam confidence.

What is a Nash equilibrium in strategic interactions?
A state where no player can unilaterally improve their payoff.
A scenario where all players choose their dominant strategy.
A situation where players cooperate to maximize joint outcomes.
A condition where every player's strategy is random.
A Nash equilibrium is defined as a strategy profile in which no player can benefit by changing their strategy while the other players' strategies remain unchanged. This condition ensures stability in strategic interactions.
What is a dominant strategy in game theory?
A strategy that yields the highest payoff regardless of what the opponents do.
A random strategy chosen by chance.
A strategy that guarantees equal outcomes for all players.
A strategy that only works if the opponent cooperates.
A dominant strategy provides a higher payoff for a player regardless of the strategies chosen by opponents. It is considered optimal because it outperforms all other strategies in every scenario.
Which of the following best describes a zero-sum game?
A game where strategies have no impact on the outcomes.
A game where payoffs sum to a positive number.
A game where one player's gain is exactly another player's loss.
A game where all players cooperate to achieve a mutual benefit.
In a zero-sum game, any gain by one player results in an equivalent loss by another, keeping the total payoff constant. This definition reflects the competitive nature of zero-sum interactions.
Why is bidding one's true value considered a dominant strategy in a Vickrey auction?
Because the auction mechanism penalizes truthful bidding.
Because it guarantees that the bidder always wins the auction.
Because it allows bidders to estimate opponents' valuations correctly.
Because the highest bidder pays the second-highest bid, eliminating incentives for deceit.
In a Vickrey auction, the winning bidder pays the second-highest bid, which removes the benefit of misrepresenting one's true valuation. As a result, bidding truthfully maximizes the bidder's expected payoff.
What best characterizes adverse selection in markets?
It refers to a scenario where sellers strategically lower prices.
It is a process where buyers and sellers negotiate for better conditions.
It is a situation where asymmetric information leads to the selection of lower-quality goods or participants.
It occurs when all market participants have perfect information.
Adverse selection arises when one party in a transaction possesses more information than the other, often resulting in a market where lower-quality products dominate. This phenomenon illustrates the negative outcomes of information asymmetry.
What is the 'winner's curse' in auction theory?
A situation where the winning bidder is rewarded with additional benefits.
A scenario where every bidder suffers a loss regardless of the auction outcome.
A phenomenon where the winning bid leads to overpayment due to incomplete information.
An outcome where the auctioneer receives less than the item's actual value.
The winner's curse refers to the potential overestimation of an item's value in auctions, often due to incomplete or asymmetric information. This can result in the winner paying more than the intrinsic value, leading to regret.
How does the concept of a mixed-strategy Nash equilibrium work?
Players choose a single pure strategy after observing opponents' moves.
It indicates that probabilities are irrelevant when forecasting outcomes.
Players randomize over strategies so that no player can improve their expected payoff by unilaterally changing their mix.
It requires that all players follow an identical strategy distribution.
In a mixed-strategy Nash equilibrium, each player assigns probabilities to their strategies, ensuring that the expected payoff remains constant regardless of the opponent's choice. This approach maintains equilibrium by inducing indifference among the opponent's strategies.
Which criterion does the Nash bargaining solution optimize?
It maximizes the product of the players' utility gains from their disagreement points.
It maximizes the sum of the players' utilities without considering alternatives.
It equally divides the total surplus regardless of individual gains.
It minimizes the difference between the players' payoffs.
The Nash bargaining solution is derived by maximizing the product of the players' gains over their disagreement or threat points. This method represents a fair compromise that reflects each player's alternative options.
What best describes a subgame perfect equilibrium?
An outcome where players randomly deviate in later stages.
An equilibrium in which players' strategies form a Nash equilibrium in every subgame.
An equilibrium that is only applicable to simultaneous-move games.
An equilibrium that disregards the credibility of threats.
A subgame perfect equilibrium requires that players' strategies prescribe a Nash equilibrium for every subgame of the original extensive-form game. This concept eliminates non-credible threats by ensuring that strategies remain optimal regardless of the stage of the game.
What does the process of iterated elimination of dominated strategies achieve?
It guarantees a unique equilibrium outcome in every game.
It simplifies the game by sequentially removing strategies that are never optimal.
It identifies multiple equally profitable strategies to maximize payoff.
It complicates the analysis by adding redundant strategies to consider.
Through iterated elimination of dominated strategies, players can discard inferior strategies that do not maximize payoffs, thereby reducing the complexity of the game. This method streamlines the analysis, although it does not always lead to a unique equilibrium.
Why is relying solely on one's own estimate risky in a common-value auction?
Because it discourages competition among bidders.
Because it leads to a zero-sum outcome where payoffs cancel out.
Because it guarantees winning the auction and, therefore, a profit.
Because it increases the risk of the winner's curse by overestimating the item's true value.
In common-value auctions, over-reliance on personal estimates can cause bidders to overestimate the item's value, leading to the winner's curse. This risk is heightened by the uncertainty due to incomplete information about the true value.
How does adverse selection typically influence market outcomes?
It results in perfectly competitive markets where all information is revealed.
It leads to market inefficiencies by favoring the participation of lower-quality goods or signals.
It attracts higher-quality goods, improving overall market performance.
It eliminates the need for pricing mechanisms in the marketplace.
Adverse selection often results from an imbalance in information, leading to market inefficiencies. This imbalance encourages lower-quality goods or less reliable signals to dominate the market, driving out higher-quality options.
In a mixed-strategy Nash equilibrium, what condition must be met for a player regarding their pure strategies?
The expected payoff from each pure strategy must be equal for the player.
The player must have a dominant pure strategy in the equilibrium.
At least one pure strategy must yield a higher payoff than the others.
Only one pure strategy should be used exclusively.
For a player to be indifferent among pure strategies, the expected payoff from each must be equal. This indifference is necessary to sustain the randomization that defines a mixed-strategy Nash equilibrium.
What does the median voter theorem imply in a majority voting system?
Incentives always lead candidates to adopt extremist positions.
Minority preferences will dominate policy decisions.
The outcome most preferred by the median voter is likely to prevail.
Voting results are unpredictable due to strategic misrepresentation.
The median voter theorem suggests that in majority-rule systems, candidates will gravitate toward the preferences of the median voter to secure a win. This centrist bias ensures that the outcome aligns closely with the median position of the electorate.
How does the strategic interaction in repeated games differ from that in single-shot games?
In repeated games, players always choose dominant strategies without deviation.
There is no significant difference between repeated and single-shot games.
Repeated games allow strategies like punishment and cooperation to influence future plays.
Single-shot games encourage long-term strategic planning similar to repeated interactions.
Repeated games create an environment where future consequences affect current strategy decisions, enabling strategies like punishment, reward, and cooperation. This contrasts sharply with single-shot games, where interactions occur only once, limiting the scope of strategic planning.
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Study Outcomes

  1. Understand fundamental game theory concepts and definitions.
  2. Analyze strategic interactions using concepts such as Nash equilibrium and dominance.
  3. Apply game theory models to real-world scenarios in economics, politics, and psychology.
  4. Evaluate the outcomes of strategic decision-making in contexts such as voting, bargaining, and auctions.

Game Theory Additional Reading

Ready to dive into the fascinating world of game theory? Here are some top-notch resources to guide your journey:

  1. This paper offers a gentle introduction to game theory, covering essential concepts like Nash equilibrium, dominance, and utility, with applications across economics, politics, and psychology.
  2. Explore a curated list of readings from MIT's game theory course, delving into bargaining, auctions, and voting, complete with links to seminal papers and recommended textbooks.
  3. This NBER working paper provides a game-theoretic perspective on competitive equilibria in markets with adverse selection, offering insights into information asymmetry and strategic behavior.
  4. Another comprehensive reading list from MIT, covering advanced topics like auction theory, cooperative decision-making, and market design, with links to influential research articles.
  5. This article from the International Journal of Game Theory examines pure strategy Nash equilibria in bargaining models, providing a deeper understanding of strategic decision-making in collective choice scenarios.
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