Game Theory Shows That

question 2

Multiple Choice

Game theory shows that

• A)sometimes pursuing profit maximization will not yield the highest joint profit.
• B)interdependencies between firms have to be taken into account when few firms dominate the market.
• C)in an oligopolistic market,firms are likely to collude.
• D)All of the above.

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Definitions:

Financing Pressure

The stress or difficulty a company faces in securing funds to finance its operations or expand its business.

Liquidity

The extent to which an asset or security can be quickly bought or sold in the market without affecting its price.

Payback Period

The number of years it takes a firm to recover its project investment. Payback does not capture a project’s entire cash flow stream and is thus not the preferred evaluation method. Note, however, that the payback does measure a project’s liquidity, and hence many firms use it as a risk measure.

Capital Budget Expenditures

Outlays of funds by a company for major investments or acquisitions intended to drive future growth.