University of Tunis

Tunis Business School Fall 2021

Decision & Game Theory

Tutorial 1

Question 1

2. Discontinue all his illegitimate activities

Question 2

1. Criterias: Experience to be acquired from, distance from home, salary, working place, work
environment,
2. Legitimate Objectives: Maximize the experience that have an impact in the academic career,
Maximize the distance from home, Maximize the salary, Work in a motivating place, work
with funny colleagues.
3. Scales of measuring levels:
Maximize the experience that have an impact in the academic career …… 8
Maximize the distance from home …. 2
Maximize the salary …. 7
Work in a motivating place …... 3
Work with funny colleagues …. 2
4. * At a cashier desk with some motivating salary five minutes away from your house.
2*8+2*2+8*7+1*3+1*2 = 81
* At an exotic place in a forest next to the sea for an environmental mission.
The salary is moderate. However, you will work with a group of funny friends.
2*8+6*2+4*7+8*3+8*2 = 96
* A training in a business company with very interesting impacts on your academic career.
The salary is fairly good, but you need to travel 150 kilometers away from your house
9*8+8*2+6*7+1*3+1*2 = 135
5. The optimal choice is A training in a business company with very interesting impacts on your
academic career. The salary is fairly good, but you need to travel 150 kilometers away from
your house.

Question 3

1. Alternatives:
A1: Selling the rights of the computer chips
A2: Building and selling computers
States of nature:
E1: Low sell level
E2: High sell level
Payoff Table
E1 E2
A1 $0 million $54 million
A2 $15 million $15 million
 2.

When selling the rights, the payoff is fixed to 15 million

When building computers, the payoff is either 54 million or nothing.

Let p be the probability of low sales so that both options are equally preferred,

Then, the expected profit in both alternatives is equal

That is 54 million *(1-p) +0*p = 15 million

Or simply 54(1-p) =15

That is 1-p = 0,2778 or p = 0,722

Sell Rights
0.722

Question 4 It rains
Suit protected plus a sense of relief
1.
Carry an umbrella

It does not rain

Suit not ruined, but inconvenience incurred

It rains
Suit ruined

It does not rain

Do not arry an Suit not ruined
umbrella
 2.

Question 5

1.

Demand 15 16 17 18
Quantity ordered
15 (15*12) -(15*10) (15*12) – (15*10) (15*12) -( 15*10) (15*12) – (15*10)
= 30 – 4 = 26 -(4*2) = 22 – (4*3) = 18
16 (15*12) – (16*10) (16*12) – (16*10) (16*12) – (16*10) (16*12) – (16*10)
+ 2 = 22 = 32 – 4 = 28 – (4*2) = 24
17 (15*12) – (17*10) (16*12) – (17*10) (17*12) – (17*10) (17*12) – (17*10)
+ 4 = 14 +2 = 24 = 34 – 4 = 30
18 (15*12) – (18*10) (16*12) – (18*10) (17*12) – (18*10) (18*12) – (18*10)
+6=6 + 4 =16 +2 = 26 = 36
2.
a. Optimistic decision-maker.

Demand 15 16 17 18 Optimistic
Quantity (max-max)
ordered
15 (15*12) - (15*12) – (15*12) -( (15*12) –
(15*10) = 30 (15*10) – 4 = 15*10) -(4*2) (15*10) – 30
26 = 22 (4*3) = 18
16 (15*12) – (16*12) – (16*12) – (16*12) –
(16*10) + 2 = (16*10) = 32 (16*10) – 4 = (16*10) – 32
22 28 (4*2) = 24
 17 (15*12) – (16*12) – (17*12) – (17*12) –
(17*10) + 4 = (17*10) +2 = (17*10) = 34 (17*10) – 4 = 34
14 24 30
18 (15*12) – (16*12) – (17*12) – (18*12) –
(18*10) + 6 = (18*10) + 4 (18*10) +2 = (18*10) = 36 36
6 =16 26

b. Pessimistic decision-maker

Demand 15 16 17 18 Pessimistic
Quantity (max-min)
ordered
15 (15*12) - (15*12) – (15*12) -( (15*12) –
(15*10) = 30 (15*10) – 4 = 15*10) -(4*2) (15*10) – 18
26 = 22 (4*3) = 18
16 (15*12) – (16*12) – (16*12) – (16*12) –
(16*10) + 2 = (16*10) = 32 (16*10) – 4 = (16*10) – 22
22 28 (4*2) = 24
17 (15*12) – (16*12) – (17*12) – (17*12) –
(17*10) + 4 = (17*10) +2 = (17*10) = 34 (17*10) – 4 = 14
14 24 30
18 (15*12) – (16*12) – (17*12) – (18*12) –
(18*10) + 6 = (18*10) + 4 (18*10) +2 = (18*10) = 36 6
6 =16 26

c. Rational decision-maker.

Demand 15 16 17 18 Rational
Quantity (Laplace)
ordered
15 (15*12) - (15*12) – (15*12) -( (15*12) –
(15*10) = 30 (15*10) – 4 = 15*10) -(4*2) (15*10) – 24
26 = 22 (4*3) = 18
16 (15*12) – (16*12) – (16*12) – (16*12) –
(16*10) + 2 = (16*10) = 32 (16*10) – 4 = (16*10) – 26.5
22 28 (4*2) = 24
17 (15*12) – (16*12) – (17*12) – (17*12) –
(17*10) + 4 = (17*10) +2 = (17*10) = 34 (17*10) – 4 = 25.5
14 24 30
18 (15*12) – (16*12) – (17*12) – (18*12) –
(18*10) + 6 = (18*10) + 4 (18*10) +2 = (18*10) = 36 21
6 =16 26
 d. Moderate decision-maker with a Hurwicz optimism index of 0.4.

Demand 15 16 17 18 Hurwicz
Quantity (α=0,4)
ordered
15 (15*12) - (15*12) – (15*12) -( (15*12) –
(15*10) = 30 (15*10) – 4 = 15*10) -(4*2) (15*10) – 22.8
26 = 22 (4*3) = 18
16 (15*12) – (16*12) – (16*12) – (16*12) –
(16*10) + 2 = (16*10) = 32 (16*10) – 4 = (16*10) – 26
22 28 (4*2) = 24
17 (15*12) – (16*12) – (17*12) – (17*12) –
(17*10) + 4 = (17*10) +2 = (17*10) = 34 (17*10) – 4 = 22
14 24 30
18 (15*12) – (16*12) – (17*12) – (18*12) –
(18*10) + 6 = (18*10) + 4 (18*10) +2 = (18*10) = 36 18
6 =16 26

Question 6

1. Optimistic approach

State of Good Bad day/easy Good Bad day/tough

nature day/easy exam day/tough exam MAX
Area exam exam
BA 80 60 70 35 80
IT 88 55 75 0 88
FIN 90 50 60 30 90
MKG 95 70 70 55 95
ACC 100 60 40 20 100

If Hafedh is extremely optimistic he must take the ACC exam because in the best scenario
(Good day/easy exam) he will be getting the best grade in that exam among all the exams.
2. Pessimistic approach

State of Good Bad day/easy Good Bad day/tough

nature day/easy exam day/tough exam MIN
Area exam exam
BA 80 60 70 35 35
IT 88 55 75 0 0
FIN 90 50 60 30 30
MKG 95 70 70 55 55
ACC 100 60 40 20 20

If Hafedh is extremely optimistic he must take the MKG exam because in the worst scenario
(Bad day/tough exam) he will be getting the best grade in that exam among all the exams.
3. Laplace criterion

State of Good Bad day/easy Good Bad day/tough

nature day/easy exam day/tough exam MEAN
Area exam exam
BA 80 60 70 35 61.25
IT 88 55 75 0 54.5
FIN 90 50 60 30 57.5
MKG 95 70 70 55 72.5
ACC 100 60 40 20 55

If Hafedh is extremely optimistic he must take the MKG exam because in the worst scenario
(Bad day/tough exam) he will be getting the best grade in that exam among all the exams.
No, it would not be appropriate to opt for Laplace criterion because MKG and BA both have 3
favorable scenarios of passing the exam and getting a grade >= 60. However, using this
criterion only MKG, which has the highest Laplace score, will be favorable.
Hafedh can use a Hurwicz criterion with an optimism index of 0.5 because all the states of
nature are likely to happen.

State of Good Bad day/easy Good Bad day/tough Hurwicz

nature day/easy exam day/tough exam (α=0,5)
Area exam exam
BA 80 60 70 35 57.5
IT 88 55 75 0 44
FIN 90 50 60 30 60
MKG 95 70 70 55 75
ACC 100 60 40 20 60

Hafedh must take the MKG exam because it has the highest score.