Under what circumstances might game theory replace a standard profit maximization function

Under what circumstances might game theory replace a standard profit maximization function

ECON 650b: Managerial Microeconomics
Final Exam
Surfield

The final exam in this course is a take-home exam. There are a pool of questions (see below) from which three will be selected. Students must complete this final exam, which is given in the Test Center of V-Space. Each question is worth 30 points, making this exam worth a total of 90 points. The exam is timed (although given the questions are provided in advance, the timed feature should not be a big constraint) at 2 hours (120 minutes). Students get only one attempt to take the final exam, so plan accordingly. Please refer to the syllabus for relevant deadlines.

The possible questions are:

1. Explain what WTA, WTP are. How are these concepts related to a market for an output good/service and the allocation of the good/service?

2. Often, in marketing one is trying to convince consumers of a product’s ‘value.’ Using the indifference curve and budget constraint concepts, explain how this ‘value’ would be represented in terms of trade-offs, maximizing customer satisfaction, and how this might generate additional sales for a retailer.

3. Under what circumstances might game theory replace a standard profit maximization function? How does a firm’s strategic behavior differ between repeated play games and single play games?

4. Why do firms fail to reach their optimal outcomes in the Prisoner’s Dilemma? Under what set of circumstances could they reach these optimal outcomes in this strategic game?

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