1. When rival firms choose to take actions that represent a Nash equilibrium,
a. the firms’ CEOs no doubt saw the movie “A Beautiful Mind” because Nash equilibrium is an outcome for otherwise crazy people.
b. each firm is taking its best action, given what it expects or believes its rivals plan to do.
c. only one of the rival firms can improve its profit by unilaterally changing its strategy.
d. the set of decisions will insure that the total profit earned by the rival firms will be maximized.
2. Which of the following statements is (are) true statements about a credible commitment?
a. All credible commitments are irreversible.
b. A credible commitment can be employed to transform a simultaneous decision into a sequential decision, giving the committing firm the first-mover position.
c. Credible commitments may be either conditional or unconditional strategic moves, depending on whether a first-mover or a second-mover advantage is present.
d. Both a and b are true statements