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1. In Nash equilibrium, what is the price UPS will charge? (A) $2 (B) $4 (C) $6 (D) $8

2. If UPS and FedEx can cooperate to maximnize the joint profit of the two firms, what is the price FedEx should charge? (A) $2 (B) $4 (C) $6 (D) $8

3. What is UPS's dominant strategy given the payoff matrix? (A) Charging $5 (B) Charging $5.5 (C) There is no dominant strategy for UPS.

4. In this game, which of the following statements is correct? (A) If UPS and FedEx both play its dominant strategy, joint profits are maximized.(B) If UPS and FedEx both play its dominant strategy, joint profits are not maximized. (C) Neither firm has a dominant strategy. (D) The Nash equilibriun does not exist.

5. Nash equilibrium in this game__________. (A) occurs when both UPS and FedEx charge $5. (B) occurs when both UPS and FedEx charge $5.5. (C) occurs when one firm charges $5 and the other firm charges $5.5. (D) does not exist.

6. Suppose UPS and FedEx face the same payoff matrix every year during the holiday season. That is, the game is repeated. Which of the following statements is correct?(A) UPS's choices are not influenced by FedEx's actions. (B) UPS and FedEx cooperate and achieve the collusive Nash equilibrium for all rounds. (C) UPS and FedEx may cooperate to both charge additional surcharges if the game is played indefinitely. (D) If the game is repcated a finite number of times (T), UPS and FedEx can cooperate until the (T-1) round. At the last round, the two firms will switch to their dominant strategy.

7. According to an article in the Wall Street Journal, neither UPS nor FedEx raised rates during the holiday season of 2014, but both firms did raise them during the 2016 holiday season. Which of the following statements is correct? (A) In 2014, neither firm raised rates during the holiday season because they were at the equilibrium of an infinite repeated game.(B) In 2016, both firms raised rates because they were at the equilibrium of a finite repeated game. (C) In 2016, both firms raised rates because they were competing to attract additional customers. (D) UPS and PedEx set output and price over and over again, continually observing their competitors' behavior and adjusting their own accordingly. This allows them to develop reputations from which trust can arise. As a result, oligopolistic coordination and coopcration can sometimes prevail.

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