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Problem Set 2: NE: Q P 1/2

The document contains three game theory problems and their solutions. The first problem is about matching pennies and finds the Nash equilibrium. The second problem is a coordination game about effort and finds how the equilibria changes with cost. The third problem is about reporting a crime and finds the equilibrium condition as a function of the number of people and costs/values.

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Andres Felipe Rivera
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27 views1 page

Problem Set 2: NE: Q P 1/2

The document contains three game theory problems and their solutions. The first problem is about matching pennies and finds the Nash equilibrium. The second problem is a coordination game about effort and finds how the equilibria changes with cost. The third problem is about reporting a crime and finds the equilibrium condition as a function of the number of people and costs/values.

Uploaded by

Andres Felipe Rivera
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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Universidad de La Sabana Game Theory

Chı́a, Cund. Colombia. Problem Set 2 2020-1

1. Matching pennies Consider the two-player game in which the players’ preferences
over deterministic action profiles are

A B
A 1, −1 −1, 1
B −1, 1 1, −1

Find all NE, including mixed strategy. Graph the best response (BR) functions for each
player.
NE: q = p = 1/2

2. A coordination game
Two people can perform a task if, and only if, they both exert effort. They are both
better off if they both exert effort and perform the task than if neither exerts effort
(and nothing is accomplished). Specifically, the players’ preferences are represented by
the expected value of the payoff functions

No effort Effort
No effort 0, 0 0, −c
Effort −c, 0 1 − c, 1 − c

Where c < 1 and can be interpreted as the cost of exerting effort.


Find all the mixed strategy Nash equilibria of this game. How do equilibria changes as
c increases?
As c increases, the probability of exerting effort is lower. As the cost of effort decreases,
we move from an equilibrium where no one exerts effort to one where both do.

3. Reporting a crime
A crime is observed by a group of n people. Each person would like the police to be
informed but prefers that someone else make the phone call. Specifically, suppose that
each person attaches the value v to the police being informed and bears the cost c if
she makes the phone call, where v > c > 0. Each player’s preferences are represented
by the expected value of a payoff function that assigns 0 to the profile in which no one
calls, v − c to any profile in which she calls, and v to any profile in which at least one
person calls, but she does not.
Denote by p the probability with which each person calls. Find the equilibrium condi-
tion.

1
p = 1 − (c/v) n−1

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