Two Players Are Engaged in a Game of Chicken

question 29

Multiple Choice

Two players are engaged in a game of Chicken. There are two possible strategies, Swerve and Drive Straight. A player who chooses to Swerve is called Chicken and gets a payoff of zero, regardless of what the other player does. A player who chooses to Drive Straight gets a payoff of 432 if the other player swerves and a payoff of -48 if the other player also chooses to Drive Straight. This game has two pure strategy equilibria and

• A) a mixed strategy equilibrium in which each player swerves with probability .10 and drives straight with probability .90.
• B) a mixed strategy in which each player swerves with probability .05 and drives straight with probability .95.
• C) a mixed strategy equilibrium in which one player swerves with probability .10 and the other swerves with probability .90.
• D) two mixed strategies in which players alternate between swerving and driving straight.
• E) no mixed strategies.

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Definitions:

Historical Cost

The original purchase cost of an asset, as recorded in the financial statements, without adjustment for inflation or market changes.

Original Cost

The purchase price of an asset or investment, including all expenses incurred to get the asset ready for its intended use.

Balance Sheet

A financial statement that summarizes a company’s assets, liabilities, and shareholders' equity at a specific point in time.

Pay Period

The interval of time for which employee wages are calculated and paid, such as weekly, biweekly, monthly.