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Summary ECO2007 Tutorial 1
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Summary of 6 pages for the course ECO2007 - Cooperation And Competition at UCT (ECO2007 Tutorial 1)
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ECO2007S Tutorial 1GLGSAR001
Question 1
For each of the following statements, indicate whether you think it is true
or false, and provide sufficient reasoning for your answer.
1.1Game Theory is the analysis of luck and chance to obtain the highest
possible payoffs. [3 marks]
False, Game Theory is the analysis of strategy. Game theory is strategic thinking. Game
theory is the analysis or science of interactive decision-making. Strategy is not about luck
or chance.
1.2 You have registered for ECO2007S, and you are now trying to
choose between the 4th and 5th editions of the course textbook. This
interaction can be described as a strategic game. [3 marks]
False, for an interaction to be a strategic game, there needs to be a mutual awareness of
the cross-effect of the actions. The game cannot be seen as strategic, as there are no other
players involved. What one player does, must affect the outcome of the other player.
Therefore, deciding between the two textbooks will not affect anyone else.
1.3 Consider two mobile phone companies, Apple and Samsung, who
share the majority of the market in South Africa. Each company needs to
decide on whether to advertise or not. Based on this information, the
companies are interacting strategically, and each company has two
strategies available to them. [3 marks]
True, each company has a choice to advertise, and not to advertise. They are playing
strategically, as for an interaction to be a strategic game, there needs to be a mutual
, awareness of the cross-effect of the actions. what one player does must affect the
outcome for the other player. And, what the other player does, will affect you
1.4 A game can be classified by its timing (complete vs incomplete),
payoffs (sequential vs simultaneous), or information (zero-sum vs non-
zero sum). [3 marks]
False, games can be classified by timing (sequential vs simultaneous), conflict or
cooperation, one-shot vs repeated, type of information, fixed vs manipulatable rules,
cooperative vs non-cooperative.
(timing: sequential vs simultaneous), (payoffs: zero-sum vs non-zero sum), (information:
complete vs incomplete)
1.5 Screening devices are tools that can be used to show your opponent
all your good qualities and attributes. As part of your justification,
provide an example of a screening device. [3 marks]
False, Screening devices are strategies that induce others to act in a way that credibly
reveals their private information. For example, when playing poker, telling your opponent
that you have never played before so that player 1 can be advantageous.
Question 2 [15 marks]
Consider the interaction between you and your flat mate about the
housework in the flat. You and your flat mate each face a binary choice:
to wash the dishes or do the laundry. If you both wash the dishes, it’s a
wasted effort and you each receive a payoff of 6. If you both do the
laundry, you will each receive a payoff of 1. If instead, you split the load
between the two tasks, the household member who washes the dishes
will receive 4 while the household member who does the laundry will
receive 9.
2.1
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