Two Players Are Engaged in a Game of Chicken

question 25

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 36 if the other player swerves and a payoff of -36 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 .50 and drives straight with probability .50.
• B) a mixed strategy equilibrium in which one player swerves with probability .50 and the other swerves with probability .50.
• C) a mixed strategy in which each player swerves with probability .25 and drives straight with probability .75.
• D) two mixed strategies in which players alternate between swerving and driving straight.
• E) no mixed strategies.

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Definitions:

Variable Overhead Rate Variance

The difference between the actual variable overhead incurred and the standard cost allocated, based on the actual amount of the allocation base used.

Supplies

Materials and items used in the daily operations of a business that do not directly become part of the final product.

Flexible Budget

A budget that modifies based on fluctuations in activity levels or volume.

Output

The quantity of goods or services produced in a given time period by a company, individual, or machine.