ECON 398 Discussion Section Week 6∗

Peter Choi & Harry Kleyer

February 17-18, 2022

1 Mixed Nash Equilibria

Definition
A mixed strategy profile σ = (σi , σ−i ) is a mixed Nash equilibrium if for every i (i.e. every
player):

Ui (σi , σ−i ) ≥ Ui (si , σ−i ) ∀si

The Indifference Property

We can construct mixed Nash equilibria by creating an environment in which players are indifferent
between multiple best responses to a belief. Then any mix over those best responses is also a best
response. A mixed Nash equilibrium occurs when some players choose certain mixes (possible that
some players are playing a pure) such that other players are have no incentive to deviate. We’ll see
this in practice in our examples.

∗
Discussion recordings will be posted to the Lecture Capture tab on Canvas. Annotated notes will be posted to
the section modules after class.

1
2 Example: Quick Start
Consider the game represented by the following normal-form.

P2
C D
P1 A 3, −2 1, 2
B 4, 3 −2, 2

Check whether the outcome {( 15 , 45 ), ( 34 , 14 )} is a MNE.

           
1 3 1 1 4 3 4 1 5
U1 (σ1 , σ2 ) = (3) + (1) + (4) + (−2) =
5 4 5 4 5 4 5 4 2

Does 1 have an incentive to deviate?

   
3 1 5
U1 (A, σ2 ) = (3) + (1) =
4 4 2
   
3 1 5
U1 (B, σ2 ) = (4) + (−2) =
4 4 2

No, 1 has no incentive to deviate. Now we do the same for 2.

           
1 3 1 1 4 3 4 1
U2 (σ1 , σ2 ) = (−2) + (2) + (3) + (2) = 2
5 4 5 4 5 4 5 4

Does 2 have an incentive to deviate?

   
1 4
U2 (C, σ1 ) = (−2) + (3) = 2
5 5
   
1 4
U2 (D, σ1 ) = (2) + (2) = 2
5 5

No, 2 has no incentive to deviate. No player has an incentive to deviate. Thus,

   
1 4 3 1
, , , ∈ MNE
5 5 4 4

2
3 Example: Finding Mixed NE
Consider the game represented by the following normal-form.

P2
C D
P1 A 3, 1 1, 2
B 2, 3 2, 1

1. Are there pure Nash equilibria?

No.

2. For each player, for what beliefs is each strategy a best response? When are they indifferent?

• Player 1: Let µ1 = (q, 1 − q). Then,

U1 (A, µ1 ) = (3)q + (1)(1 − q) = 2q + 1

U1 (B, µ1 ) = (2)q + (2)(1 − q) = 2

Thus, A is 1’s best response when,

1
2q + 1 ≥ 2 ⇐⇒ q ≥
2
and B when,
1
q≤
2
Both A and B are best responses to the belief q = 12 .

q ∈ 12 , 1
 
A,

BR1 (µ1 ) = σ1∗ (µ1 ) = {A, B}, q = 12

q ∈ 0, 12
 
B,


• Player 2: Let µ2 = (p, 1 − p). Then,

U2 (C, µ2 ) = (1)p + (3)(1 − p) = 3 − 2p

U2 (D, µ2 ) = (2)p + (1)(1 − p) = 1 + p

Thus, C is 2’s best response when,

2
3 − 2p ≥ 1 + p ⇐⇒ p ≤
3
and D when,
2
p≥
3
Both C and D are best responses to the belief q = 23 .

q ∈ 21 , 1
 
C,

BR2 (µ2 ) = σ2∗ (µ2 ) = {C, D}, q = 12

q ∈ 0, 12
 
D,


3
3. Are there any mixed Nash equilibria?

• If Player 1 plays p = 23 then Player 2 is indifferent between pure strategies

• If Player 2 plays q = 21 then Player 1 is indifferent between pure strategies
• Thus,    
2 1 1 1
, , , ∈ MNE
3 3 2 2

4
4 Example: More Complicated
Now consider this new game. (Should look familiar; won’t be exactly the same)

P2
L R
P1 A 8, 0 1, 7
B 6, 3 3, 3
C 3, 2 3, 1
D 1, 5 8, 0

1. For what beliefs about Player 2’s strategies are each of Player 1’s strategies a best response?
(Hint: To simplify the problem: is there a strategy we can rule out as a never best response?)

U1 (A, µ1 ) = (8)q + (1)(1 − q) = 7q + 1

U1 (B, µ1 ) = (6)q + (3)(1 − q) = 3q + 3
U1 (C, µ1 ) = (3)q + (3)(1 − q) = 3
U1 (D, µ1 ) = (1)q + (8)(1 − q) = −7q + 8

C is strictly dominated by 12 , 0, 0, 12 so it will never be a best response.

• A is a best response when,

7q + 1 ≥ 3q + 3 7q + 1 ≥ −7q + 8
4q ≥ 2 14q ≥ 7
1 1
q≥ q≥
2 2
1
⇐⇒ q ≥
2
• B is a best response when,

3q + 3 ≥ 7q + 1 3q + 3 ≥ −7q + 8
2 ≥ 4q 10q ≥ 5
1 1
q≤ q≥
2 2
1
⇐⇒ q =
2
• D is a best response when,

−7q + 8 ≥ 7q + 1 −7q + 8 ≥ 3q + 3
−14q ≥ −7 −10q ≥ −5
1 1
q≤ q≤
2 2
1
⇐⇒ q ≤
2

5
2. Find a mixed Nash equilibrium where one player plays a pure strategy.

Is there a case where one player plays a pure strategy and the other player is
indifferent between pure strategies?
• Yes, If Player 1 plays B, then Player 2 is indifferent between L and R since
they give the same payoff. Since there are no other strategies for Player 2,
these must both be best responses.
To complete the mix, we just want to make sure Player 1 doesn’t deviate from B.
So when is B the best response for Player 1?
• When q = 1
2
1 1



Then B, 2, 2 ∈ MNE

3. Find another mixed Nash equilibrium in which the pure strategy you used above is assigned
0 probability.

Place 0 probability on B. When is Player 1 indefferent between A and D?

• When q = 1
2
We now set Player 1’s mix over A and D to ensure that Player 2 doesn’t deviate
from mixing with q = 21 .
• Let σ1 = (p, 0, 0, 1 − p). Then,

U2 (σ1 , L) = (0)p + (5)(1 − p) = 5 − 5p

U2 (σ1 , R) = (7)p + (0)(1 − p) = 7p
5
So Player 2 is indifferent when 5 − 5p = 7p ⇐⇒ p = 12 . Thus,
   
5 7 1 1
, 0, 0, , , ∈ MNE
12 12 2 2

4. Are there any other MNE?

There are infinitely many. Suppose Player 2 plays σ2 = 12 , 12 . Then Player 1 is

indifferent between A, B, and D. Let σ1 = (p1 , p2 , 0, 1 − p1 − p2 ). We need Player

2 to be indifferent between L and R for them to not want to deviate from σ2 ,

U2 (σ1 , L) = (0)p1 + (3)p2 + (5)(1 − p1 − p2 ) = 5 − 5p1 − 2p2

U2 (σ1 , R) = (7)p1 + (3)p2 + (0)(1 − p1 − p2 ) = 7p1 + 3p2

Player 2 is indifferent between L and R when,

5 − 5p1 − 2p2 = 7p1 + 3p2

⇐⇒ 12p1 = 5 − 5p2
5
⇐⇒ p1 = (1 − p2 )
12
1 1 7


Any σ1 that satisfies this condition will generate a M N E, such as σ1 = 3 , 5 , 0, 15 .