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Game Theory Slides Chapter 5x3slides 8
Game Theory Slides Chapter 5x3slides 8
Felix Munoz-Garcia
De…nition
A two-player, strictly competitive game is a two-player game with
the property that, for every two strategy pro…les s and s’,
Player 2
Heads Tails
Player 1 Heads 1, 1 1, 1
Tails 1, 1 1, 1
One example of a strategy pro…le is s = (H, H ), and another
is s 0 = (T , H ), where
u1 (s ) > u1 (s 0 ) and u2 (s ) < u2 (s 0 )
Importantly, this is true for any two strategy pro…les: if one
player is improving his payo¤, the other player is reducing his.
In fact, many board games satisfy this condition: if we play in
such a way that I end up winning, it must be that my
opponent loses, and viceversa.
Examples: tennis, chess, football, etc.
Practice:
P2
Heads Tails
Heads 1, -1 -1, 1
P1
Tails -1, 1 1, -1
3 u1 (H, H ) = u1 (T , T ), i.e., 1 = 1
u2 (H, H ) = u2 (T , T ), i.e., 1 = 1
4 u1 (H, T ) = u1 (T , H ), i.e., 1 = 1
u2 (H, T ) = u2 (T , H ), i.e., 1 = 1
Prisoner’s Dilemma
Player 2
Confess Not Confess
Wife
Football Opera
Football 3, 1 0, 0
Husband
Opera 0, 0 1, 3
Player 2
Heads Tails
Player 1 Heads 1, 1 1, 1
Tails 1, 1 1, 1
Player 2
Right Left
Player 1 Right 20, 80 70, 30
Left 90, 10 30, 70
Zero-Sum Games
Constant-Sum Games
Player 2
Right Left
Player 1 Right 20 70
Left 90 30
Player 2
Right Left
Player 1 Right 20 70
Left 90 30
Player 2
Heads Tails
p Heads 1, -1 -1, 1
Player 1
1 - p Tails -1, 1 1, -1
Remark
Note that EU1 (p jH ) represents the expected utility that player
1 obtains from randomizing between H (with probability p)
and T (with probability 1 p), conditional on player 2
selecting Heads (in the …rst column).
Do not confuse it with EU1 (H ) that we used in msNE, which
re‡ects player 1’s expected utility from selecting H with
certainty but facing a randomization from his opponent (e.g.,
player 2 randomizing between H and T with probability q and
1 q respectively.
Security (Max-min) Strategy - Matching Pennies Game
EU1(p|H) = 2p - 1
0 p
1
½
EU1(p|T) = 1 –2p
-1
Security (Max-min) Strategy - Matching Pennies Game
3rd step: Identify the lower envelope, i.e.,
min u1 (s1 , s2 )
s2
EU1(p| )
1
EU1(p|H) = 2p - 1
0 p
1
½
EU1(p|T) = 1 –2p
-1
min u1(s1,s2) is the lower envelope
s2
Security (Max-min) Strategy - Matching Pennies Game
4th step: Identify the highest peak of the lower envelope: i.e.,
max min u1 (s1 , s2 )
s1 s2
EU1(p| )
1
EU1(p|H) = 2p - 1
EU1(p|T) = 1 – 2p
-1
min u1(s1,s2) is the lower envelope
s2
Security (Max-min) Strategy - Matching Pennies Game
Heads 1, -1 -1, 1
Player 1
Tails -1, 1 1, -1
EU2 (q jH ) =
EU2 (q jT ) =
Security (Max-min) Strategy - Matching Pennies Game
0 q
1
-1
Security (Max-min) Strategy - Tennis Game
Player 2
Right Left
Player 2
Right Left
70
30
20
0 6
p
11 1
Lower envelope: min u1(s1,s2)
s2
Security (Max-min) Strategy - Tennis Game
Trick:
max min u1 (s1 , s2 )
s1 s2
That is,
6
70 70p = 30 + 40p =) 60 = 110p =) p =
11
Hence,
6 570
EU1 (p jR ) = 90 70 =
11 11
|{z}
This is the height of the highest
peak in the lower envelope.
Security (Max-min) Strategy - Tennis Game
0 q
1
Security or Max-min strategy
Hence,
Security (Max-min) Strategies
Nash Equilibrium
Strategies
Left Right
Player 1 Top 6, 0 0, 6
Bottom 3, 2 6, 0
1 Find every player’s maxmin strategy.
2 What is every player’s expected payo¤ from playing her
maxmin strategy?
3 Find every player’s Nash equilibrium strategy, both using pure
strategies (psNE) and using mixed strategies (msNE).
4 What is every player’s expected payo¤ from playing her Nash
equilibrium strategy?
5 Compare players’payo¤ when they play maxmin and Nash
equilibrium strategies (from parts (b) and (d), respectively).
Which is higher?
What if a game is not strictly competitive?
Player 2
X Y
Player 1 A 3, 5 1, 1
B 2, 6 1, 2
Player 2
X Y
A 3, 5 -1, 1
Player 1
B 2, 6 1, 2
Player 2
X Y
p A 3, 5 -1, 1
Player 1
1-p B 2, 6 1, 2
EU1 (p jX ) = 3p + 2(1 p) = 2 + p
EU1 (p jY ) = 1p + 1(1 p) = 1 2p
What if a game is not strictly competitive?
2
EU1(p|X) =2 + p
1
EU1(p|Y) = 1 –2p
1
0
p
-1
min u1(s1,s2) is the lower envelope
s2
What if a game is not strictly competitive?
Action B in the
previous example Action A in the
previous example
Nash Equilibrium
Strategies