The Following Payoff Matrix Shows the Outcomes for the US

question 42

Multiple Choice

The following payoff matrix shows the outcomes for the US and the USSR from relying on conventional weapons or atomic weapons.The percentages refer to the fraction of the population that would die if a war occurred under the two weapons strategies.Assume the payoff matrix is for 1945,shortly after the US had demonstrated the effectiveness of the atomic bomb in World War II,i.e. ,the example begins in the upper right cell where USA has atomic weapons and the USSR has only conventional weapons. $\begin{array}{c}\quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \text { USSR }\\\text { USA }\begin{array}{|l|l|l|}\hline& \text {Atomic Weapons } & \text { Conventional } \\\hline \text { Atomic } & \text { In the USA, } 60 \% \text { would die, } & \text { In the USA S\% would die, } \\ \text { Weapons } &\text { In the USSR, } 60 \% \text { would die } & \text { In the USSR, } 90 \% \text { would die } \\\hline \text { Conventional } &\text { In the USA, } 90 \% \text { would die; } & \text { In the USA } 10 \% \text { would die, } \\\text { In the USSR, } 5 \% \text { would die } & \text { In the USSR, } 10 \% \text { would die.. } \\\hline\end{array}\end{array}$
Refer to the information given above.Suppose that a diplomat representing the USSR made the following statement to a diplomat representing the United States: "We will disarm all of our atomic weapons and not develop any new ones." That statement is:

• A)a credible promise because it would convince the United States to disarm as well.
• B)a credible promise because it contains a commitment device.
• C)a non-credible promise because mutual disarmament yields a worse outcome for both countries.
• D)a non-credible promise because of the commitment problem.

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Definitions:

Skimming Demand

A pricing strategy where a high price is set to "skim" layers of demand from the market sequentially, usually employed during the introduction of a new product.

Penetration Demand

A market strategy focused on increasing market share for an existing product through penetration pricing, advertisement, and sales promotion.

Demand Curve

A graph that relates the quantity sold and price, showing the maximum number of units that will be sold at a given price.

Pricing Approach

Strategies employed by businesses to set the price of their products or services, taking into account costs, demand, and competition.