Question 20

Two siblings, Sarah and Tom are playing a simultaneous 'hit and tell' game. Sarah can hit Tom or not and Tom can tattle on Sarah or not. Relative to no hitting and no tattling, if Sarah hits Tom, and he tattles they both experience a loss of 10. Not telling, gets Tom a bruise, a loss of 5 but Sarah gains 5. If he tattles untruthfully, he gets a gain of 5 and Sarah loses 5. If they get along, no one gets anything

If Tom wants to 'not be hit,' what strategy could he follow?

a. Threaten to not tell

b. Always not tell

c. Threaten to tell d. All of the above

......

Question 35

1. Jim's Dairy is deciding whether or not to enter the market for ice cream, currently monopolized by Jay's Ice-cream. If it enters the market, Jay's can either accommodate him and share his $10 million in profits equally with Jim or fight him and cause a $5 million loss for each in a price war.

In a sequential game, given Jay's best response, what would Jim's best response be?

a. Not enter the market

b. Enter the market

c. Run away and cower in fear

d. Fight