GT Game 2 17
GT Game 2 17
GT Game 2 17
Mark Dean
Spring 2017
D o m in a n c e
Recap
So far we have
Explained what game theory is trying to do
Formally de…ned what we mean by a (strategic form) game
Introduced some classic games
Discussed the concept of mixed strategies
Today we will start to think about how to ‘solve’a game
i.e. make some predictions about how people will play the
game
D o m in a n c e
Rationality
To begin with, let’s see how far we can get with the
assumption of rationality
Should be familiar from last semester
In particular, let’s assume that
Each player has some belief about what the other player
will do
Chooses their action in order to maximize expected utility
given their beliefs
Does this allow us to make predictions about how players
will play the game?
D o m in a n c e
Example
Prisoner’s Dilemma
Bob
Confess Don’t Confess
Anne Confess 6; 6 0; 9
Don’t Confess 9; 0 1; 1
De…nition
A strategy s0i 2 Si strictly dominates s00i if 8s i 2 S i;
Lemma
If i has a strictly dominant strategy, then
arg maxsi ui (si ; s i ) is independent of s i and is unique.
D o m in a n c e
De…nition
A strategy s0i 2 Si weakly dominates s00i if 8s i 2 S i;
ui (s0i ; s i ) ui (s00i ; s i )
and 9s0 i 2 S i ;
Example
Is D dominated in the following game?
Bob
L R
U 3; 0 0; 0
Anne
M 0; 0 3; 0
D 1; 0 1; 0
De…nition
A strategy s0i 2 Si is strictly dominated by a mixed strategy
i 2 (Si ) if
ui (s0i ; s i ) < ui ( i ; s i ) 8s i 2 S i:
D o m in a n c e
Prisoner’s Dilemma
Example
Prisoner’s Dilemma
Bob
Confess Don’t Confess Go Bananas
Anne Confess 6; 6 0; 9 100; 100
Don’t Confess 9; 0 1; 1 1; 100
De…nition
Iterated Deletion of Strictly Dominated Strategies is described
by the following procedure
1 Delete all strategies that are strictly dominated. Go to 2.
2 In the remaining game, are there any strictly dominated
strategies? If Yes, go to 1. If No, done.
A game is called dominance solvable, or solvable by strict
dominance, if this procedure leads to a unique outcome.
D o m in a n c e
Example
Beauty Contest
Occurred in UK in 1930s.
Newspaper prints 100 photographs of women. People
choose the six "most beautiful" faces. Those who pick the
most popular face are eligible for a prize
D o m in a n c e
Example
D o m in a n c e
Example
Example
2 2
u(xi ; x i ) = 100 jxi xj if xi is closest to x
3 3
= 0 otherwise
Example
Not quite
Although rationality does give us some predictive power
The average cannot be larger than 100.
Two thirds of the average cannot be larger than 23 100:
xi > 23 100 have a payo¤ of 0 for sure, and is strictly
dominated (by what?):
So we can use rationality to guess than no-one will play
hiver than 23 100
Can we do better?
D o m in a n c e
Example
Round 1:
The average cannot be larger than 100.
Two thirds of the average cannot be larger than 23 100:
xi > 23 100 is strictly dominated and so we can delete this
Round 2:
The average cannot be larger than 23 100.
2 2
Two thirds of the average cannot be larger than 3 3 100:
2
xi > 32 100 is strictly dominated:
Leads to a unique solution......
D o m in a n c e
Example
Does IDSDS always give a sensible answer?
Bob
L R
Anne U 3; 4 4; 5
D 2; 1000000 0; 100000
IDWDS
Example
Iterated Deletion of Weakly Dominated Strategies
Bob
L R
Anne U 1; 1 0; 0
D 0; 0 0; 0
Example
Order Matters in IDWDS
Bob
L R
U 1; 1 0; 0
Anne
M 1; 1 2; 1
D 0; 0 2; 1