ECON7200 Economic Principles (M)
Week 3 Assignment [20 marks]
Read the article “Testing Times for Sochi Drug Cheats”
Available here: https://www.ft.com/content/3c0d4538-99c4-11e3-91cd-00144feab7de
Or here through the library with a University log-in:
a) Draw a 2-player payoff matrix showing the payoffs for each player depending on if
they and their competitor use drugs to enhance their performance or not. Make up
the numbers for this yourself to ensure that it depicts a ‘prisoners dilemma’ type
situation as described where both parties will end up taking the drugs although they
would both be better off if neither did.
(Hint: The payoffs do not need to be in monetary terms, but can instead be thought
of as utility, or an abstract numerical measure of their expected
b) Explain, with the assistance of your constructed example, why this outcome is likely
to arise based on the individual incentives faced by each player. Be sure to reference
concepts such as best response, dominant strategy and Nash equilibrium.
c) If it is a one-off simultaneous move game, do you think that talking about the
outcome in advance is likely to impact the outcome? Explain.
d) Suggest several ways in which this outcome could be avoided, and explain how these