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Game Theory in Psychology and Behavioral Economics

Description: This quiz covers the application of game theory in psychology and behavioral economics. It explores how individuals make decisions in strategic situations, considering the actions and payoffs of others.
Number of Questions: 15
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Tags: game theory psychology behavioral economics strategic decision-making
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In game theory, what is a Nash Equilibrium?

  1. A set of strategies where no player can improve their payoff by changing their strategy unilaterally.

  2. A set of strategies where all players have the same payoff.

  3. A set of strategies where the sum of all players' payoffs is maximized.

  4. A set of strategies where the difference between the highest and lowest payoffs is minimized.


Correct Option: A
Explanation:

A Nash Equilibrium is a set of strategies where no player can improve their payoff by changing their strategy unilaterally, assuming other players' strategies remain unchanged.

Which of the following is an example of a zero-sum game?

  1. A tennis match between two players.

  2. A negotiation between two parties over a contract.

  3. A cooperative project between two companies.

  4. A game of chess between two players.


Correct Option: A
Explanation:

In a zero-sum game, the gains of one player are exactly offset by the losses of the other player, resulting in a total sum of zero.

What is the Prisoner's Dilemma?

  1. A situation where two individuals have conflicting interests and each person's best strategy depends on the other person's choice.

  2. A situation where two individuals have perfectly aligned interests and both benefit from cooperation.

  3. A situation where one individual's gain is another individual's loss, resulting in a zero-sum outcome.

  4. A situation where two individuals can achieve a mutually beneficial outcome through cooperation, but each individual has an incentive to defect.


Correct Option: A
Explanation:

The Prisoner's Dilemma is a classic game theory scenario that illustrates the tension between individual rationality and collective rationality.

What is the concept of reciprocity in game theory?

  1. The tendency for individuals to cooperate with others who have previously cooperated with them.

  2. The tendency for individuals to defect against others who have previously defected against them.

  3. The tendency for individuals to match the level of cooperation or defection exhibited by others.

  4. The tendency for individuals to maximize their own payoff, regardless of the actions of others.


Correct Option: A
Explanation:

Reciprocity is a social norm that encourages cooperation by rewarding cooperative behavior and punishing uncooperative behavior.

Which of the following is an example of a coordination game?

  1. A game of chicken, where two drivers race towards each other and must decide whether to swerve or collide.

  2. A negotiation between two parties over the terms of a contract.

  3. A game of rock-paper-scissors, where players simultaneously choose one of three options.

  4. A game of monopoly, where players compete to acquire properties and build houses and hotels.


Correct Option: C
Explanation:

In a coordination game, players have multiple possible strategies, and the best strategy for each player depends on the strategies chosen by the other players.

What is the concept of bounded rationality in game theory?

  1. The idea that individuals have limited cognitive resources and cannot always make perfectly rational decisions.

  2. The idea that individuals are always rational and make decisions that maximize their expected utility.

  3. The idea that individuals are irrational and make decisions that are not in their best interests.

  4. The idea that individuals are perfectly rational and always make the optimal decision in any given situation.


Correct Option: A
Explanation:

Bounded rationality acknowledges that individuals have limited information, time, and cognitive abilities, which can lead to imperfect decision-making.

Which of the following is an example of a signaling game?

  1. A job interview, where a candidate tries to signal their skills and qualifications to a potential employer.

  2. A negotiation between two parties over the terms of a contract.

  3. A game of poker, where players try to bluff their opponents into believing they have a better hand.

  4. A game of monopoly, where players compete to acquire properties and build houses and hotels.


Correct Option: A
Explanation:

In a signaling game, one player (the sender) sends a signal to another player (the receiver) to convey information about their type or intentions.

What is the concept of evolutionary game theory?

  1. The study of how strategies evolve over time in a population of individuals playing a game.

  2. The study of how individuals make decisions in strategic situations, considering the actions and payoffs of others.

  3. The study of how social norms and institutions shape individual decision-making.

  4. The study of how emotions and cognitive biases influence decision-making in game-like situations.


Correct Option: A
Explanation:

Evolutionary game theory applies the principles of natural selection and evolution to the study of strategic interactions among individuals.

Which of the following is an example of a public goods game?

  1. A game where players contribute to a common pool of resources, and each player's payoff depends on the total amount contributed.

  2. A game where players compete to acquire resources, and the winner takes all.

  3. A game where players cooperate to achieve a common goal, and all players benefit equally from the outcome.

  4. A game where players negotiate over the terms of a contract, and each player's payoff depends on the agreed-upon terms.


Correct Option: A
Explanation:

In a public goods game, players face a collective action problem, where each player's individual incentive is to contribute nothing, but the group as a whole benefits from cooperation.

What is the concept of altruism in game theory?

  1. The tendency for individuals to act in the best interests of others, even at a cost to themselves.

  2. The tendency for individuals to act in their own best interests, regardless of the consequences for others.

  3. The tendency for individuals to cooperate with others in order to achieve a mutually beneficial outcome.

  4. The tendency for individuals to defect against others in order to maximize their own payoff.


Correct Option: A
Explanation:

Altruism is a behavior that benefits others at a cost to the individual performing the behavior.

Which of the following is an example of a bargaining game?

  1. A negotiation between two parties over the terms of a contract.

  2. A game of chicken, where two drivers race towards each other and must decide whether to swerve or collide.

  3. A game of rock-paper-scissors, where players simultaneously choose one of three options.

  4. A game of monopoly, where players compete to acquire properties and build houses and hotels.


Correct Option: A
Explanation:

In a bargaining game, two or more players negotiate over the distribution of a resource, and each player's payoff depends on the agreed-upon terms.

What is the concept of dominance in game theory?

  1. A strategy that is always better than all other strategies, regardless of the strategies chosen by other players.

  2. A strategy that is better than all other strategies when played against a specific strategy.

  3. A strategy that is better than all other strategies when played against a random strategy.

  4. A strategy that is better than all other strategies when played against a rational strategy.


Correct Option: A
Explanation:

A dominant strategy is a strategy that yields a higher payoff than any other strategy, regardless of the strategies chosen by other players.

Which of the following is an example of a trust game?

  1. A game where one player sends money to another player, and the second player can choose to return some or all of the money.

  2. A game where two players simultaneously choose to cooperate or defect, and their payoffs depend on the combination of their choices.

  3. A game where players compete to acquire resources, and the winner takes all.

  4. A game where players negotiate over the terms of a contract, and each player's payoff depends on the agreed-upon terms.


Correct Option: A
Explanation:

In a trust game, one player (the trustor) sends money to another player (the trustee), and the trustee can choose to return some or all of the money. The trustor's payoff depends on the amount of money returned by the trustee.

What is the concept of risk aversion in game theory?

  1. The tendency for individuals to prefer a certain outcome over a risky outcome, even if the expected value of the risky outcome is higher.

  2. The tendency for individuals to prefer a risky outcome over a certain outcome, even if the expected value of the risky outcome is lower.

  3. The tendency for individuals to be indifferent between a certain outcome and a risky outcome, regardless of the expected values of the two outcomes.

  4. The tendency for individuals to prefer a risky outcome over a certain outcome, only if the expected value of the risky outcome is higher.


Correct Option: A
Explanation:

Risk aversion is the tendency for individuals to prefer a certain outcome over a risky outcome, even if the expected value of the risky outcome is higher.

Which of the following is an example of a beauty contest game?

  1. A game where players try to guess the average guess of other players.

  2. A game where players compete to acquire resources, and the winner takes all.

  3. A game where players negotiate over the terms of a contract, and each player's payoff depends on the agreed-upon terms.

  4. A game where players try to predict the future price of a stock.


Correct Option: A
Explanation:

In a beauty contest game, players try to guess the average guess of other players, and the player who comes closest to the average guess wins.

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