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Tutorial 1

This document discusses game theory concepts like dominant strategies, Nash equilibria, and voluntary public goods games. It contains examples of game matrices and asks conceptual questions about: 1) the relationships between parameters if certain strategies are dominant, 2) whether games are dominance solvable, 3) payoffs in voluntary public goods games for different contribution levels, and 4) Nash equilibria in a meeting coordination game.

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27 views

Tutorial 1

This document discusses game theory concepts like dominant strategies, Nash equilibria, and voluntary public goods games. It contains examples of game matrices and asks conceptual questions about: 1) the relationships between parameters if certain strategies are dominant, 2) whether games are dominance solvable, 3) payoffs in voluntary public goods games for different contribution levels, and 4) Nash equilibria in a meeting coordination game.

Uploaded by

h
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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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HE3001 Tutorial 1

1. Consider the following game matrix.

Player B

Left Right
Player A Top a, b c, d
Bottom e, f g, h

(a) If top and left are strictly dominant strategies, then what do we know the relationship of the
parameters?
(b) If (top, left) is a Nash equilibrium, then what do we know the relationship of the parameters?
(c) If top and left are strictly dominant strategies, will (top, left) be a Nash equilibrium? Why?
(d) If (top, left) is a Nash equilibrium, must the strategies be strictly dominant strategies? Why?

2. Consider the following game matrices.

(a) Is the game strictly dominance solvable? Try this starting from (i) Player A and (ii) Player B.
Player B

L M P
U 3, 0 0, -5 0, -4
Player A C 1, -1 3, 3 -2, 4
D 2, 4 4, 1 -1, 8

(b) Is the game weakly dominance solvable? Try this starting from (i) Player A and (ii) Player B.

Player B

L C R
U 6, 0 3, 1 3, 2
Player A M 5, 3 5, 2 3, 2
D 6, 2 4, 2 4, 2

(c) In a two-player game, when both players have strictly dominant strategies, will the Nash
equilibrium be unique? What about if both players only have weakly dominant strategies?
3. In a two-player voluntary public goods game, each player is given $10 and can choose
between two options: keeping the money or contributing it to a “public fund”. Money in the
public fund gets multiplied by 1.6 and is then divided equally between the two players. The
outcomes are as follows:
 If both contribute their $10, each gets back $16 from the Public fund ($20 × 1.6/2 =
$16).
 If one contributes and the other does not, the contributor gets $8, and the non-
contributor receives $18 (original $10 + $8 from the public fund).
 If neither contributes, both have their original $10.

The payoff matrix for this game is:

Player B

Contribute Keep
Player A Contribute 16, 16 8, 18
Keep 18, 8 10, 10

(a) Does this game have a dominant strategy equilibrium?

Let us consider a more general version of the voluntary public goods game with N players.
Each player can contribute either $10 or nothing to the public fund. All money that is
contributed to the public fund gets multiplied by some number β >1 and then divided
equally among all players in the game (including those who do not contribute.)

(b) If β >1, which of the following outcomes gives the higher payoff to each player?
1) All players contribute their $10 or 2) all players keep their $10.
(c) Suppose that exactly K of the other players contribute. If you keep your $10, you will have
this $10 plus your share of the public fund contributed by others. What will your payoff be in
this case? If you contribute your $10, what will be your payoff?
(d) If β=3 and N=5 , what is the dominant strategy equilibrium for this game?
(e) In general, what relationship between β and N must hold for “Keep” to be a dominant
strategy?
4. Evangeline and Gabriel want to meet each other. There are two possible strategies available
for each of them. These are Go to the Party or Stay Home and Study. They will surely meet if
they both go to the party, and they will surely not otherwise. The outcomes are as follows:
 If both go to the party, the payoff to meeting is 1,000 for each of them.
 If one of them goes to the party while the other stays at home, the one who goes to the
party gets a payoff of 1, while the one who stays at home gets 0.
 If both stay home, each get 1.

The payoffs are described by the matrix below.


Gabriel

Go to Party Stay Home


Evangeline Go to Party 1000, 1000 1, 0
Stay Home 0, 1 1, 1

(a) Is there any outcome in this game where both players are using weakly dominant strategies?
(b) Find all of the pure-strategy Nash equilibria for this game.
(c) Which Nash equilibria is more reasonable and likely to emerge?

Conceptual Questions

5. Construct a payoff matrix with two players where:


(a) Player 1 has a dominant strategy.
(b) Player 2 has a dominated strategy but no dominant strategy.

6. Is there always a (pure-strategy) Nash equilibria in the following cases?


(If no, construct an example to show why)
(a) Players 1 and 2 have a strictly dominant pure strategy.
(b) Players 1 and 2 have a strictly dominated pure strategy.
(c) Player 1 has a strictly dominant pure strategy.

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