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Problem 1

1. A player can have at most one strictly dominant strategy in any normal form game. 2. The Nash equilibria of the given 3x3 game are (a1, b1) and (a1, b3) in pure strategies and a mixed strategy of (2/3)a1 + (1/3)a2, (5/7)b1 + (2/7)b3. 3. The unique Nash equilibrium in pure and mixed strategies of the given 2x4 game is for both players to play (a2, b2) with certainty.

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Velichka Dimitrova
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130 views2 pages

Problem 1

1. A player can have at most one strictly dominant strategy in any normal form game. 2. The Nash equilibria of the given 3x3 game are (a1, b1) and (a1, b3) in pure strategies and a mixed strategy of (2/3)a1 + (1/3)a2, (5/7)b1 + (2/7)b3. 3. The unique Nash equilibrium in pure and mixed strategies of the given 2x4 game is for both players to play (a2, b2) with certainty.

Uploaded by

Velichka Dimitrova
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Problem Set 1

1. Show that in any normal form game, a player can have at most one
strictly dominant strategy.
2. Find the set of Nash equilibria (in pure and mixed strategies) of the
following game.
b 1 b2 b3
a1 5,6 7,2 0,8
a2 3,4 5,6 1,2
a3 2,7 0,2 0,0

3. The following table describes the payoffs of a 2-player game in which


each player has 4 pure strategies. Show that the unique Nash equilibrium in
pure and mixed strategies is (a2 , b2 ) played with certainty.
b1 b2 b3 b4
a1 0,7 2,5 7,0 0,1
a2 5,2 3,3 5,2 0,1
a3 7,0 2,5 0,7 0,1
a4 0,0 0,-2 0,0 10,-1

4. There are two identical firms producing a homogeneous good whose


demand curve is q = 100 p. Firms simultaneously choose prices. Neither
firm can produce more than K units of output. If both firms choose the same
price, then they share the market equally subject to the capacity constraint
of K. If the prices are unequal, say pi < pj , then the low-price firm i, sells
qi (pi , pj ) = min(100 pi , K). If qi (pi , pj ) < K, then firm j sells nothing. If
qi (pi , pj ) = K, then firm j sells min(100 qi (pi , pj ) pj , K). The cost of
production for each firm is 10 per unit.
(i) Derive the payoff function of either firm.
(ii) Suppose K = 40. Show that there is no pure strategy Nash equilib-
rium in this game.
(iii) Suppose K = 30. Show that there is a pure strategy Nash equilib-
rium.
5. A set of 100 individuals play the following game. Each individual
simultaneously announces an integer between 1 and 100. The winner is the
individual whose announcement is closest to one-thirds the average number.
A prize of 100 is shared equally amongst the winners.

1
(i) Show that no pure strategy strictly dominates any other.

(ii) Find a mixed strategy that strictly dominates 100.

(ii) Show that iterated elimination of strictly dominated strategies yields


the unique choice of 1 for each of the players.

6. Consider an electoral contest between two political parties which have


to announce (simultaneously) party positions in the policy space given by the
interval [0, 1]. Voters ideal points are uniformly distributed over the interval
[0, 1]. Each voter votes for the party whose announced position is closest to
his ideal point. In case the two parties announced point is equidistant from
a voters ideal point, then the voter votes for each party with probability
half. Each party wants to maximize its vote share.

(i) Show that there is a unique pure strategy Nash equilibrium in which
each party locates at 21 .

(ii) Suppose now that there are three parties. Show that there is no pure
strategy Nash equilibrium.

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