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University of Hong Kong
1st semester 2009-10
ECON1001 Introduction to Economics I, Subclasses I
Assignment 3 Due time: 5:30pm, November 26 (Thursday), 2009
Answer all questions. While you are encouraged to discuss with your classmates, you must write
up your own script. (The answer to each question should not exceed one page.) Please hand in
your script to your TA (Miss Titi Hung) on or before the deadline via her pageon box on the 9th
floor of K.K. Leung Building.
1. You are playing the game "rock, paper, scissors" with a friend. In this game, each of
you makes the symbol for one of the three items (rock, paper, or scissors) with your
hand and then you simultaneously reveal your choices. The winner of the game is
determined by the following: rock smashes scissors (rock wins), paper covers rock
(paper wins) and scissors cut paper (scissors win). If you each select the same item,
it is a tie, and you play again.
a. Who are the players and what are the strategies in this game?
b. Construct the payoff matrix for the game.
c. Is there a dominant strategy in the game? Explain.
2. From Chapter 11, Q5.
Suppose the law says that Jones may not emit smoke from his factory unless he gets
permission from Smith, who lives downwind. If the relevant costs and benefits of
filtering the smoke from Jones’s production process are as shown in the following table,
and if Jones and Smith can negotiate with one another at no cost, will Jones emit smoke?
Surplus for Jones
Surplus for Smith
Jones emits smoke
$200
400
Jones does not emit smoke
$160
420