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Problem Set 4

This document contains a problem set with 4 questions about game theory. Question 1 asks to find the Nash equilibria of a 2-player game after eliminating dominated strategies. Questions 2 analyzes the strategies of Player 1 in a 2x3 game matrix. Question 3 asks which of Player 2's strategies is strictly dominated. Question 4 considers whether any of Player 1's strategies become weakly dominated if one of Player 2's strategies is eliminated. The final question constructs a 2-player game where eating more food provides higher utility but also higher costs, and finds the dominant strategy equilibrium.

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Lea Alvaro
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113 views2 pages

Problem Set 4

This document contains a problem set with 4 questions about game theory. Question 1 asks to find the Nash equilibria of a 2-player game after eliminating dominated strategies. Questions 2 analyzes the strategies of Player 1 in a 2x3 game matrix. Question 3 asks which of Player 2's strategies is strictly dominated. Question 4 considers whether any of Player 1's strategies become weakly dominated if one of Player 2's strategies is eliminated. The final question constructs a 2-player game where eating more food provides higher utility but also higher costs, and finds the dominant strategy equilibrium.

Uploaded by

Lea Alvaro
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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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Problem Set 4

ALVARO, Lea – 35229601-5


Due at the beginning of next class (13:00) on May 12.

1. What are the Nash equilibria of the following game after one eliminates dominated strategies?

In this game, there are no strictly dominated strategies. For player 1, middle weakly dominates top
and for player 2 middle weakly dominates left. If we proceed to eliminate these strategies, we get to
the following Nash equilibria: (middle, middle) and (bottom, right).

2. Consider the game matrix given here.

(1) Which of Player 1's strategies is strictly dominated no matter what Player 2 does?

Player’s 1 strictly dominated strategy is bottom, as -3 is strictly lower than the all the other payoffs
he would get choosing the other strategies i.e. 1, 2, 0.

(2) Which of Player 1's strategies is weakly dominated?

Player’s 1 middle strategy is weakly dominated by top, as when player 2 chooses either left or
middle, top and middle yield the same payoff (1=1), but when player 2 chooses right, top’s payoff
is bigger than middle’s payoff (2>0).

(3) Which of Player 2's strategies is strictly dominated no matter what Player 1 does?

Player 2 does not have any strictly dominated strategies.

(4) If we eliminate Player 2's dominated strategies, are any of Player 1's strategies weakly
dominated?

If, for player 2, we eliminate right which is weakly dominated, then we do not get any weakly
dominated strategy for player 1: bottom would be strictly dominated while top and middle will
share the same payoffs.

Definition: s’i is weakly dominated by si if, for any possible combination of the other
players' strategies, player i's payoff from s’i is weakly less than that from si. That is,
𝑢𝑖 (𝑠𝑖 , 𝑠−𝑖 ) ≥ 𝑢𝑖 (𝑠′𝑖 , 𝑠−𝑖 ) 𝑓𝑜𝑟 𝑎𝑙𝑙 𝑠−𝑖 ∈ 𝑆𝑖

This means that for some 𝑠−𝑖 ∈ 𝑆𝑖 this weak inequality may hold strictly, while for other
𝑠′−𝑖 ∈ 𝑆−𝑖 it will hold with equality.

3. We plan to have dinner at a restaurant. The number of participants in the dinner is n. Each
participant (player), i, simultaneously determines the amount of food he or she eats. If player i eats
xi, he/she gets ln xi utility in monetary terms.
If player i eats xi, it will cost him/her xi JPY. Each player pays for the total cost (∑𝑛𝑘=1 𝑥𝑖 ) divided
by the number of participants. Thus, each player's payoff is the monetary utility gained from the
dinner minus the cost per person.
Find the dominant strategy equilibrium for this game.

For simplicity, let’s assume we have two players, and they have two possible choices in terms of
amount of food: Low (L) and High (H).

Since the players’ utility functions are logarithms, which grow “slowly” with respect to the increase
of amount of food they choose to eat, the increase in utility by choosing H will not be greater than
the increased cost bore by choosing the most expensive option. This means they will always choose
L.

Let’s suppose n=2 (P1 and P2) and L=10, H=20


The payoff matrix will then be
P2
L H
L -7.7,-7.7 -12.7,-12
H -12,-12.7 -17,-17
P1

The highlighted payoffs are the best responses for each strategy, thus (L,L) is the dominant strategy
equilibrium.

For each player


-7.7= ln (10)-20/2 : (L,L)
-12.7 = ln (10)-30/2 : (L,H)
-12 = ln (20) – 30/2 : (H,L)
-17 = ln (20) – 40/2 : (H,H)

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