Dominant and Dominated Strategies

Carlos Hurtado

Department of Economics
University of Illinois at Urbana-Champaign
[email protected]

May 29th, 2015

C. Hurtado (UIUC - Economics) Game Theory

On the Agenda

1 Formalizing the Game

2 Dominant and Dominated Strategies

3 Iterated Delation of Strictly Dominated Strategies

4 Iterated Delation of Dominated Strategies

5 Exercises

C. Hurtado (UIUC - Economics) Game Theory

 Formalizing the Game

On the Agenda

1 Formalizing the Game

2 Dominant and Dominated Strategies

3 Iterated Delation of Strictly Dominated Strategies

4 Iterated Delation of Dominated Strategies

5 Exercises

C. Hurtado (UIUC - Economics) Game Theory 1 / 22

 Formalizing the Game

Formalizing the Game

Up to this point we defined game without been formal. Let me introduce some
Notation:
- set of players: I = {1, 2, · · · , N}
- set of actions: ∀i ∈ I, ai ∈ Ai , where each player i has a set of actions Ai .
- strategies for each player: ∀i ∈ I, si ∈ Si , where each player i has a set of
pure strategies Si available to him. A strategy is a complete contingent plan
for playing the game, which specifies a feasible action of a player’s
information sets in the game. QN
- profile of pure strategies: s = (s1 , s2 , · · · , sN ) ∈ i=1 Si .
Note: let s−i = (s1 , s2 , · · · , si−1 , si+1 , · · · , sN ) ∈ S−i , we will denote
s = (si , s−i ) ∈ (Si , S−i ).
QN
- Payoff function: ui : i=1 Si → R, denoted by ui (si , s−i )

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 Formalizing the Game

Formalizing the Game

Now we can denote game with pure strategies and complete information in normal
form by: ΓN = {I, {Si }i , {ui }i }.
What about the games with mix strategies?
We have taken it that when a player acts at any information set, he
deterministically picks an action from the set of available actions. But there is no
fundamental reason why this has to be case.

Definition
A mixed strategy for player i is a function σi : Si →P [0, 1], which assigns a probability
σi (si ) ≥ 0 to each pure strategy si ∈ Si , satisfying σ (s ) = 1.
si ∈Si i i

We denote the set of mixed strategies by ∆(Si ).

Note that a pure strategy can be viewed as a special case of a mixed strategy in
which the probability distribution over the elements of Si is degenerate.

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 Formalizing the Game

Example

Meeting in New York:

- Players: Two players, 1 and 2
- Rules: The two players can not communicate. They are suppose to meet in NYC
at noon to have lunch but they have not specify where. Each must decide where
to go (only one choice).
- Outcomes: If they meet each other, they enjoy other’s company. Otherwise, they
eat alone.
- Payoffs: They attach a monetary value of 100 USD to other’s company and 0
USD to eat alone.

player 2
A B C
A 100,100 0,0 0,0
player 1
B 0,0 100,100 0,0

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 Formalizing the Game

Example

Meeting in New York:

- set of players: I = {1, 2}
- set of actions: A1 = {A, B}, and A2 = {A, B, C }
- strategies for each player: S1 = A1 , and S2 = A2 (Why?)
Q2
- Payoff function: ui : i=1
Si → R, denoted by ui (si , s−i )

100 if si = s−i
u(si , s−i ) =
0 6 s−i
if si =

Player 2
- pure strategies: S2 = {A, B, C }. Player 2 has 3 pure strategies.
- mixed strategies: P3
∆(S2 ) = {(σ12 , σ22 , σ32 ) ∈ R3 |σm
2
≥ 0∀m = 1, 2, 3 and σ 2 = 1}
m=1 m

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 Dominant and Dominated Strategies

On the Agenda

1 Formalizing the Game

2 Dominant and Dominated Strategies

3 Iterated Delation of Strictly Dominated Strategies

4 Iterated Delation of Dominated Strategies

5 Exercises

C. Hurtado (UIUC - Economics) Game Theory 6 / 22

 Dominant and Dominated Strategies

Dominant and Dominated Strategies

Now we turn to the central question of game theory: What should be expected to
observe in a game played by rational agents who are fully knowledgeable about the
structure of the game and each others’ rationality?
To keep matters simple we initially ignore the possibility that players might
randomize in their strategy choices.
The prisoner’s dilemma:
* Two members of a criminal gang are arrested and imprisoned. Each prisoner is in solitary
confinement with no means of speaking to or exchanging messages with the other.
* The prosecutors do not have enough evidence to convict the pair on the principal charge.
They hope to get both sentenced to a year in prison on a lesser charge.
* Simultaneously, the prosecutors offer each prisoner a bargain. Each prisoner is given the
opportunity either to: betray the other by testifying that the other committed the crime,
or to cooperate with the other by remaining silent.
* Here is the offer:
- If A and B each betray the other, each of them serves 2 years in prison
- If A betrays B but B remains silent, A will be set free and B will serve 3 years in
prison (and vice versa)
- If A and B both remain silent, both of them will only serve 1 year in prison (on the
lesser charge)

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 Dominant and Dominated Strategies

Dominant and Dominated Strategies

Let me put prisoner’s dilemma as a game of trust:

player 2
trust cheat
trust 5,5 1,10
player 1
cheat 10,1 2,2

Observe that regardless of what her opponent does, player i is strictly better off
playing Cheat rather than Trust. This is precisely what is meant by a strictly
dominant strategy.
Player 2 plays Trust. Player 1 knows that 10 > 5, better to Cheat.
Player 2 plays Cheat. Player 1 knows that 2 > 1, better to Cheat.
Regardless of the other’s strategies, it is always better to Cheat.
Note that both would be better off if they both play trust.
Lesson: self-interested behavior in games may not lead to socially optimal
outcomes.
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 Dominant and Dominated Strategies

Dominant and Dominated Strategies

Definition
A strategy si ∈ Si is a strictly dominant strategy for player i if for all
s̃i 6= si and all s−i ∈ S−i , ui (si , s−i ) > ui (s̃i , s−i ).

A strictly dominant strategy for i uniquely maximizes her payoff for any strategy
profile of all other players.
If such a strategy exists, it is highly reasonable to expect a player to play it. In a
sense, this is a consequence of a player’s ”rationality”.

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 Dominant and Dominated Strategies

Dominant and Dominated Strategies

What about if a strictly dominant strategy doesn’t exist?

player 2
a b c
A 5,5 0,10 3,4
player 1
B 3,0 2,2 4,5

You can easily convince yourself that there are no strictly dominant strategies here
for either player.
Notice that regardless of whether Player 1 plays A or B, Player 2 does strictly
better by playing b rather than a.
That is, a is ”strictly dominated” by b.

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 Dominant and Dominated Strategies

Dominant and Dominated Strategies

Definition
A strategy si ∈ Si is strictly dominated for player i if there exists a
strategy s̃i ∈ Si such that for all s−i ∈ S−i , ui (s̃i , s−i ) > ui (si , s−i ). In this
case, we say that s̃i strictly dominates si .

In words, s̃i strictly dominates si if it yields a strictly higher payoff regardless of

what (pure) strategy rivals use.
Note that the definition would also permits us to use mixed strategies
Using this terminology, we can restate the definition of strictly dominant: A
strategy si is strictly dominant if it strictly dominates all other strategies.
It is reasonable that a player will not play a strictly dominated strategy, a
consequence of rationality, again.

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 Iterated Delation of Strictly Dominated Strategies

On the Agenda

1 Formalizing the Game

2 Dominant and Dominated Strategies

3 Iterated Delation of Strictly Dominated Strategies

4 Iterated Delation of Dominated Strategies

5 Exercises

C. Hurtado (UIUC - Economics) Game Theory 12 / 22

 Iterated Delation of Strictly Dominated Strategies

Iterated Delation of Strictly Dominated Strategies

player 2
a b c
A 5,5 0,10 3,4
player 1
B 3,0 2,2 4,5

We argued that a is strictly dominated (by b) for Player 2; hence rationality of

Player 2 dictates she won’t play it.
We can push the logic further: if Player 1 knows that Player 2 is rational, he
should realize that Player 2 will not play strategy a.
Notice that we are now moving from the rationality of each player to the mutual
knowledge of each player’s rationality.
Once Player 1 realizes that 2 will not play a and ”deletes” this strategy from the
strategy space, then strategy A becomes strictly dominated by strategy B for
Player 2.
If we iterate the knowledge of rationality once again, then Player 2 realizes that 1
will not play A, and hence ”deletes” A.
Player 2 should play c. We have arrived at a ”solution”.
C. Hurtado (UIUC - Economics) Game Theory 13 / 22
 Iterated Delation of Strictly Dominated Strategies

Iterated Delation of Strictly Dominated Strategies

Definition
A game is strict-dominance solvable if iterated deletion of strictly
dominated strategies results in a unique strategy profile.

Since in principle we might have to iterate numerous times in order to solve a

strict-dominance solvable game, the process can effectively can only be justified by
common knowledge of rationality.
As with strictly dominant strategies, it is also true that most games are not
strict-dominance solvable.
You might worry whether the order in which we delete strategies iteratively
matters. Insofar as we are working with strictly dominated strategies so far, it does
not.

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 Iterated Delation of Dominated Strategies

On the Agenda

1 Formalizing the Game

2 Dominant and Dominated Strategies

3 Iterated Delation of Strictly Dominated Strategies

4 Iterated Delation of Dominated Strategies

5 Exercises

C. Hurtado (UIUC - Economics) Game Theory 15 / 22

 Iterated Delation of Dominated Strategies

Iterated Delation of Dominated Strategies

Definition
A strategy si ∈ Si is a weakly dominant strategy for player i if for all
s̃i 6= si and all s−i ∈ S−i , ui (si , s−i ) ≥ ui (s̃i , s−i ), and for at least one
choice of s−i the inequality is strict.

Definition
A strategy si ∈ Si is weakly dominated for player i if there exists a strategy
s̃i ∈ Si such that for all s−i ∈ S−i , ui (s̃i , s−i ) ≥ ui (si , s−i ), and for at least
one choice of s−i the inequality is strict. In this case, we say that s̃i weakly
dominates si .

Definition
A game is weakly-dominance solvable if iterated deletion of weakly
dominated strategies results in a unique strategy profile.

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 Iterated Delation of Dominated Strategies

Iterated Delation of Dominated Strategies

Using this terminology, we can restate the definition of weakly dominant: A

strategy si is weakly dominant if it weakly dominates all other strategies.
You might worry whether the order in which we delete strategies iteratively
matters. Delation of dominated strategies could leave to different outcomes.

P2
L R
U 5,1 4,0
P1 M 6,0 3,1
D 6,4 4,4

P2 P2
L R L R
U 5,1 4,0 M 6,0 3,1
P1 P1
D 6,4 4,4 D 6,4 4,4

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 Exercises

On the Agenda

1 Formalizing the Game

2 Dominant and Dominated Strategies

3 Iterated Delation of Strictly Dominated Strategies

4 Iterated Delation of Dominated Strategies

5 Exercises

C. Hurtado (UIUC - Economics) Game Theory 18 / 22

 Exercises

Exercises
Exercise 1. Prove that a player can have at most one strictly dominant strategy.
Exercise 2. Apply the iterated elimination of strictly dominated strategies to the
following normal form games. Note that in some cases there may remain more
that one strategy for each player. Say exactly in what order you eliminated rows
and columns.
Exercise 3. Apply the iterated elimination of dominated strategies to the following
normal form games. Note that in some cases there may remain more that one
strategy for each player. Say exactly in what order you eliminated rows and
columns.

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 Exercises

Exercises

Exercise 2 (cont.).

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 Exercises

Exercises
Exercise 2 (cont.).

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 Exercises

Exercises

Exercise 2 (cont.).

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