Game Theory and its Applications

(BITS F314)

Paras Sachdeva

Department of Economics and Finance

BITS Pilani, Pilani Campus

www.parassachdevaeco.com

Paras Sachdeva BITS Pilani, Pilani Campus Game Theory and its Applications (F314)
 Game Theory and its Applications

Strategic Games: Dominant Strategy Equilibria

Dominates, Dominated, Dominant.

A B C
D 1,0 1,2 3,1
E 0,3 0,1 2,0

Player 1: Strategy D strictly dominates strategy E.

Player 1 will prefer strategy D over strategy E, independent of what
player 2 chooses.
Player1: Strategy E is strictly dominated by strategy D.
Player 2: Strategy B strictly dominates Strategy C.
Player 2: No domination between strategy A and strategy B.
Player 1: Strategy D is a dominant strategy.
Player2: No dominant strategy.
Paras Sachdeva BITS Pilani, Pilani Campus Game Theory and its Applications (F314)
 Game Theory and its Applications

Strategic Games: Dominant Strategy Equilibria

Strong Domination

Given a strategic form game Γ = ⟨N, (Si ) , (ui )⟩, a strategy

si ∈ Si of player i is said to be strongly dominated by another
strategy si′ ∈ Si if

ui (si′ , s−i ) > ui (si , s−i ) ∀s−i ∈ S−i

We also say strategy si′ strongly dominates strategy si .

A strategy si ∈ Si of player i is said to be strongly dominated if
there exists a strategy si′ ∈ Si such that

ui (si′ , s−i ) > ui (si , s−i ) ∀s−i ∈ S−i

Paras Sachdeva BITS Pilani, Pilani Campus Game Theory and its Applications (F314)
 Game Theory and its Applications

Strategic Games: Dominant Strategy Equilibria

Strongly Dominant Strategy

A strategy si∗ ∈ Si is said to be a strongly dominant strategy for

player i if it strongly dominates every other strategy si ∈ Si .
That is, ∀si ̸= si∗ ,

ui (si∗ , s−i ) > ui (si , s−i ) ∀s−i ∈ S−i

Strongly dominant strategy is unique.

Strongly Dominant Strategy Equilibria

A strategy profile (s1∗ , . . . , sn∗ ) is called a strongly dominant

strategy equilibrium of the game Γ = ⟨N, (Si ) , (ui )⟩ if
, ∀i = 1, 2, . . . , n, the strategy si∗ is a strongly dominant strategy
for player i.
Paras Sachdeva BITS Pilani, Pilani Campus Game Theory and its Applications (F314)
 Game Theory and its Applications

Strategic Games: Dominant Strategy Equilibria

A B C
D 1,0 1,2 3,1
E 0,0 0,1 2,0

Player 1: Dominant strategy is D

Player 2: Dominant strategy is B
(D, B) is the dominant strategy equilibria.
Dominant strategy equilibria doesn’t always exist.
If it exists, it is unique.

Paras Sachdeva BITS Pilani, Pilani Campus Game Theory and its Applications (F314)
 Game Theory and its Applications

Strategic Games: Dominant Strategy Equilibria

A B C
D 1,0 1,2 3,1
E 0,3 0,1 2,0

Player 1: strong dominant strategy is D

Player 2: doesn’t have a strong dominant strategy.
strong dominant strategy equilibria doesn’t exist.

Paras Sachdeva BITS Pilani, Pilani Campus Game Theory and its Applications (F314)
 Game Theory and its Applications

Strategic Games: Dominant Strategy Equilibria

Weak Domination

A strategy si ∈ Si is said to be weakly dominated by a strategy

si′ ∈ Si for player i if

ui (si′ , s−i ) ≥ ui (si , s−i ) ∀s−i ∈ S−i

and for some s−i ∈ S−i

ui (si′ , s−i ) > ui (si , s−i )

The strategy si′ is said to weakly dominate strategy si .

Paras Sachdeva BITS Pilani, Pilani Campus Game Theory and its Applications (F314)
 Game Theory and its Applications

Strategic Games: Dominant Strategy Equilibria

Weakly Dominant Strategy

A strategy si∗ is said to be a weakly dominant strategy for player

i if it weakly dominates every other strategy si ∈ Si .

∀si ∈ (Si /si∗ )

ui (si∗ , s−i ) ≥ ui (si , s−i ) ∀s−i ∈ S−i

and for some s−i ∈ S−i

ui (si∗ , s−i ) > ui (si , s−i )

Paras Sachdeva BITS Pilani, Pilani Campus Game Theory and its Applications (F314)
 Game Theory and its Applications

Strategic Games: Dominant Strategy Equilibria

Weakly Dominant Strategy

A B C
D 1,2 1,2 3,1
E 0,3 1,1 3,1

Player 1: Strategy D weakly dominates strategy E.

Player 1: Strategy D is a weakly dominant strategy.
Player 2: Strategy B weakly dominates strategy C.
Player 2: Strategy A weakly dominates strategy B and C.
Player 2: Strategy A is a weakly dominant strategy.

Paras Sachdeva BITS Pilani, Pilani Campus Game Theory and its Applications (F314)
 Game Theory and its Applications

Strategic Games: Dominant Strategy Equilibria

Weakly Dominant Strategy

A strong dominant strategy is a weak dominant strategy.

A weak dominant strategy is not necessarily a strong dominant

strategy.

Paras Sachdeva BITS Pilani, Pilani Campus Game Theory and its Applications (F314)
 Game Theory and its Applications

Strategic Games: Dominant Strategy Equilibria

Weakly Dominant Strategy Equilibria

Given a game Γ = ⟨N, (Si ) , (ui )⟩, a strategy profile (s1∗ , . . . , sn∗ ) is
called a weakly dominant strategy equilibrium if ∀i = 1, . . . , n,
the strategy si∗ is a weakly dominant strategy for player i.

Paras Sachdeva BITS Pilani, Pilani Campus Game Theory and its Applications (F314)
 Game Theory and its Applications

Strategic Games: Dominant Strategy Equilibria

How to find Dominant Strategy Equilibria?

Find strictly and weakly dominant strategies of each individual.

All players will play their dominant strategies.
Dominant strategy Equilibria.

Challanges

Difficult to find the dominant strategy.

Sometimes, a dominant strategy doesn’t exist.

Paras Sachdeva BITS Pilani, Pilani Campus Game Theory and its Applications (F314)
 Game Theory and its Applications

Strategic Games: Dominant Strategy Equilibria

Iterated Elimination of strictly dominated strategies

A strategy si ∈ Si of player i is said to be strongly dominated if

there exists a strategy si∗ ∈ Si such that

ui (si∗ , s−i ) > ui (si , s−i ) ∀s−i ∈ S−i

A player will never play a dominated strategy.

Paras Sachdeva BITS Pilani, Pilani Campus Game Theory and its Applications (F314)
 Game Theory and its Applications

Strategic Games: Dominant Strategy Equilibria

Iterated Elimination of strictly dominated strategies

Let Si be the strategy set of player i.

si′ ∈ Si be strongly dominated strategy.
The player will play from Si \ si′

Similarly, all the dominated strategies will be eliminated.

After elimination, two outcomes are possible
Each player is left with one strategy, that is, their dominant
strategy: Dominant strategy equilibria.
Some players are left with more than one strategy that is not
dominated by another strategy.

Paras Sachdeva BITS Pilani, Pilani Campus Game Theory and its Applications (F314)
 Game Theory and its Applications

Strategic Games: Dominant Strategy Equilibria

Iterated Elimination of strictly dominated strategies

After the elimination of dominated strategies the game becomes

Γz = ⟨N, (Siz ) , (ui )⟩

If Siz has only one strategy for each player i = 1 . . . n, then we

say that iterated strict dominant strategy profile.
If Siz has more than one strategy for some player i, then we say
that the output of the ISDS procedure.

Paras Sachdeva BITS Pilani, Pilani Campus Game Theory and its Applications (F314)
 Game Theory and its Applications

Strategic Games: Dominant Strategy Equilibria

Iterated Elimination of strictly dominated strategies

A B C
D 1,0 1,2 3,1
E 0,0.5 0,1 2,0

Player 2: Strategy C dominated by strategy B.

A B
D 1,0 1,2
E 0,0.5 0,1

Player 2: Strategy A dominated by strategy B.

Paras Sachdeva BITS Pilani, Pilani Campus Game Theory and its Applications (F314)
 Game Theory and its Applications

Strategic Games: Dominant Strategy Equilibria

Iterated Elimination of strictly dominated strategies

B
D 1,2
E 0,1

Player 1: Strategy E dominated by strategy D.

B
D 1,2

Player 2: Strategy B is the iterated strict dominant strategy.

Player 1: Strategy D is the iterated strict dominant strategy.

Paras Sachdeva BITS Pilani, Pilani Campus Game Theory and its Applications (F314)
 Game Theory and its Applications

Strategic Games: Dominant Strategy Equilibria

Iterated Elimination of strictly dominated strategies

In iterated elimination of strictly dominated strategy, order of

elimination doesn’t matter.
In iterated elimination of weakly dominated strategy, order of
elimination matters.

Paras Sachdeva BITS Pilani, Pilani Campus Game Theory and its Applications (F314)