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problem set 3

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34 views3 pages

problem set 3

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Asteroid Destroyer
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Exercise 1

Consider the two games below. Apply the iterated elimination of strictly
dominated strategies to each and determine the set of rationalizable actions
for each player.

Game 1 Game 2
L R L R
T (3, 0) (0, 1) T (1, 3) (−2, 0)
M (0, 0) (3, 1) M (−2, 0) (1, 3)
B (1, 1) (1, 0) B (0, 1) (0, 1)

Exercise 2
Consider the two games below. Apply the iterated elimination of weakly
dominated strategies. Which strategies survive in Game 1? What is the
Nash equilibrium of the game? Which strategies survive in Game 2? Does
the outcome depend on the order of elimination?
Game 1 Game 2
L R
L R
T (1, 1) (0, 0)
T (0, 0) (2, 1)
M (1, 1) (2, 1)
B (3, 2) (1, 2)
B (0, 0) (2, 1)

Exercise 3
Consider the strategic game below
B S
B (2,1) (0,0)
S (0,0) (1,2)

Let p ∈ [0, 1] be the probability of player 1 playing B, and q ∈ [0, 1] be the


probability of player 2 playing B.

1
1. Find and draw in (p, q) space (with q on the horizontal axis) the best
response of player 1, br1 (q).
2. Find and draw in (p, q) space the best response of player 2, br2 (p).
3. Find all Nash equilibria (NE) of this game.

Exercise 4
Consider the strategic game below

H T
H (1, −1) (−1, 1)
T (−1, 1) (1, −1)

Let p ∈ [0, 1] be the probability of player 1 playing H, and q ∈ [0, 1] be the


probability of player 2 playing H.

1. Find and draw in (p, q) space (with q on the horizontal axis) the best
response of player 1, br1 (q).
2. Find and draw in (p, q) space the best response of player 2, br2 (p).
3. Find all Nash equilibria (NE) of this game.

Exercise 5

Rock Paper Scissors


Rock (0,0) (-1,1) (1,-1)
Paper (1,-1) (0,0) (-1,1)
Scissors (-1,1) (1,-1) (0,0)

(a) Find the pure strategy Nash equilibrium of the game.


(b) Find the mixed strategy Nash equilibrium of the game.

2
Exercise 6
Consider the strategic game below.

s0 s1 s2 s3 s4 s5
w0 4,5 4,14 4,13 4,12 4,11 4,10
w1 13,5 3,4 3,13 3,12 3,11 3,10
w2 12,5 12,4 2,3 2,12 2,11 2,10
w3 11,5 11,4 11,3 1,2 1,11 1,10
w4 10,5 10,4 10,3 10,2 0,1 0,10

The game captures the following situation. There are two firms involved in
a patent (investment) race. The firms are weak and strong (or deep- and
shallow-pocketed). The strong player has an endowment of 5 and the weak
player has an endowment of 4. The payoff of each firm is her endowment
minus its investment spending. In addition, whichever firm spends the most
earns a reward of 10. If both firms spend the same amount, neither one gets
the reward. Find all the NE of this game.

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