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Answer Key II

This document contains the answer key to problems from EC 246 on decisions and games. Problem 1 summarizes the Nash equilibria for the "Extended Matching Pennies Game - 1" as either both players choosing cover, or both players randomizing between heads/tails and cover. All equilibria generate the same payoff. Problem 2 verifies a proposed mixed strategy Nash equilibrium for the "Extended Matching Pennies Game - 2" and lists 4 claims that must be proved to establish it as the game's only Nash equilibrium.

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Parmesh Gupta
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40 views

Answer Key II

This document contains the answer key to problems from EC 246 on decisions and games. Problem 1 summarizes the Nash equilibria for the "Extended Matching Pennies Game - 1" as either both players choosing cover, or both players randomizing between heads/tails and cover. All equilibria generate the same payoff. Problem 2 verifies a proposed mixed strategy Nash equilibrium for the "Extended Matching Pennies Game - 2" and lists 4 claims that must be proved to establish it as the game's only Nash equilibrium.

Uploaded by

Parmesh Gupta
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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EC 246: Decisions & Games

Answer Key to Problem Set II

Problem 1: All (pure-strategy and mixed-strategy) Nash equilibria of the “Extended


Matching Pennies Game – 1”:
[Row plays cover, Column plays cover], [Row plays cover, Column plays {heads, tails; p,
1–p (for some p  [0.4, 0.6])}], [Row plays {heads, tails; p, 1–p (for some p  [0.4, 0.6])},
Column plays cover].
All Nash equilibria generate the same payoff vector {6 for Row, 6 for Column}. The
different Nash equilibria of course generate discrete outcomes – one deterministic, and all
others stochastic [I leave it for you to enumerate them]. This example shows that a game can
have multiple mixed-strategy Nash equilibria when it has a unique pure-strategy Nash
equilibrium [this addresses a question asked in class.]

Problem 2: Verify that the following strategies constitute a Nash equilibrium for the
“Extended Matching Pennies Game – 2”:
[Row: {Tails, Covered; 1/6, 5/6}, Column: {Heads, Tails; 2/5, 3/5}]
The following “claims”, which need to be proved, establish the fact that the above Nash
equilibrium is the only Nash equilibrium of the game.
1. There’s no Nash equilibrium in which either Row or Column plays deterministically.
2. There’s no Nash equilibrium in which “Row randomizes over Heads and Tails” and
“Column randomizes over Heads and Tails” (in such a case, Row would want to
deviate to Covered).
3. There’s no Nash equilibrium in which “Row randomizes over Heads and Covered”
and “Column randomizes over Heads and Tails” (in such a case, Column would want
to deviate to Tails).
4. There’s no Nash equilibrium in which “Row randomizes over Heads, Tails, and
Covered” and “Column randomizes over Heads and Tails” (no Column randomization
over Heads and Tails can make Row indifferent between Heads, Tails, and Covered).

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