Two Players Are Engaged in a Game of Chicken

question 27

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 32 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 .60 and drives straight with probability .40.
• B)two mixed strategies in which players alternate between swerving and driving straight.
• C)a mixed strategy equilibrium in which one player swerves with probability .60 and the other swerves with probability .40.
• D)a mixed strategy in which each player swerves with probability .30 and drives straight with probability .70.
• E)no mixed strategies.

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Definitions:

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year, calculated by dividing current assets by current liabilities.

Acid-Test Ratio

A financial metric that measures a company's ability to pay off its current liabilities with its quick assets such as cash, marketable securities, and accounts receivable.

Quick Ratio

A metric to evaluate a company's short-term liquidity position, calculated by dividing liquid assets by current liabilities.

Working Capital

The difference between a company's current assets and current liabilities, indicating the liquidity of the business.