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GT Assignment 1

This document contains an assignment on game theory with 6 questions. For question 1, it models two situations as strategic games and finds the Nash equilibria. For question 2, it defines a game between two animals fighting over prey and finds two Nash equilibria. It then analyzes contributions to a public good for question 3. Question 4 models a problem as a game and finds a single Nash equilibrium. Question 5 analyzes maximization of utility functions for two players in two scenarios. Finally, question 6 presents a 3x3 payoff matrix game.

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Tihid Reza
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63 views

GT Assignment 1

This document contains an assignment on game theory with 6 questions. For question 1, it models two situations as strategic games and finds the Nash equilibria. For question 2, it defines a game between two animals fighting over prey and finds two Nash equilibria. It then analyzes contributions to a public good for question 3. Question 4 models a problem as a game and finds a single Nash equilibrium. Question 5 analyzes maximization of utility functions for two players in two scenarios. Finally, question 6 presents a 3x3 payoff matrix game.

Uploaded by

Tihid Reza
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Assignment 1

Game Theory
170010033
Swapnik Jagarlapudi

Q1) a)​Suppose that each person cares only about her own comfort.
Model the situation as a strategic game. Find its Nash equilibrium
(equilibria). Is it identical to Prisoner’s Dilemma?

P​1​\P​2 Sit Stand


Sit 5,5 10,1
Stand 1,10 1,1

This game is identical to Prisoner’s Dilemma. The Nash equilibrium is the


state where both of them sit, which is also the Pareto optimal outcome.

b) ​In this case, the payoffs will be reversed if both of them choose different
actions.

P​1​\P​2 Sit Stand


Sit 5,5 0,10
Stand 10,0 1,1

The Nash equilibrium is the state where both of them stand, whereas the
Pareto optimal outcome is where both of them sit.
c) ​In the first case, both of them care only about themselves sitting, so both
of them are comfortable when both of them are sitting.

Q2) ​There are two animals fighting over prey. Each prefers to be
aggressive if the opponent is passive, passive if the opponent is
aggressive; given its own stance, it prefers the outcome where the
opponent is passive to that in which its opponent is aggressive.
Considering two states A (aggressive) and P (passive), we can write
payoffs for the first animal as follows:
u​1​(A,P) > u​1​(P,P)
u​1​(P,A) > u​1​(A,A)
u​1​(A,P) > u​1​(A,A)
u​1​(P,P) > u​1​(P,A)
Combining these inequalities, we get:
u​1​(A,P) > u​1​(P,P) > u​1​(P,A) > u​1​(A,A)
Assigning values 10, 7, 5, 2 respectively, we get the game table as follows:

A​1​\A​2 Aggressive Passive


Aggressive 2,2 10,5
Passive 5,10 7,7

This game has 2 Nash equilibria, where both of the animals have different
actions, which are also the Pareto optimal states.

Q3) ​There cannot be a Nash equilibrium where more than k people


contribute. As the payoff is greater for people who have received the good
and not contributed, they will be inclined to not contribute in case k people
have already contributed. So there is a natural tendency to go away from
the state where more than k people contribute. So that cannot be a Nash
equilibrium. However, the state where k people contribute will be a Nash
equilibrium. This is because exactly k contributions are needed in order to
provide the good. Suppose one person decides not to contribute. Then, the
payoff of that person will reduce. If a person who decided not to contribute
changes his decision, then his payoff will also reduce. So there is a
tendency to remain in this state.
The state in which no person contributes is also a Nash equilibrium, since if
any person decides to contribute, they will have a loss in their payoff, as
the state where they neither contribute nor get the good has greater payoff
than the state where they contribute and don’t receive the good. Thus they
will have no tendency to deviate from this state. If there are less than k but
more than 0 contributors, then the contributors in this case will have an
inclination to change their state, since that way they can increase payoff.
Thus, this state is not a Nash equilibrium.

Q4) ​Suppose the sums announced by P​1​ is x and the sum announced by
P​2​ is y. Then we can represent this problem as follows.
If x + y - 10 = 0 and x = y, then u​1​(x,y) = u​2​(x,y) = 5.
If x + y - 10 < 0, then u​1​(x,y) = x, u​2​(x,y) = y
If x + y - 10 > 0 and x = y, then u​1​(x,y) = x, u​2​(x,y) = y
If x + y - 10 > 0 and x =/= y, if x < y then u​1​(x,y) = x and u​2​(x,y) = 10 - x and
if x > y, then u​1​(x,y) = 10 - y, u​2​(x,y) = y

Now we look at the best response for player 1.


Suppose y <= 5. Then, P​1​ will get maximum payoff for x = 10 - y.
=> BR​1​(y<=5) = 10-y
If y > 5, then P​1​ will have to choose a number x such that x - y = dx (i.e. the
difference should be miniscule). This means there are an infinite number of
possible values for x. Thus there is no best response. For both players, the
only intersection is the point (x = 5, y = 5). So this is the only state which is
a Nash equilibrium.

The best response graph for P​1​ will look as follows:


Q5) i) ​f(x​1​,x​2​) = 3x​1​x​2​, c(x​i​) = x​i​2
u​1​(x​1​,x​2​) = 3x​1​x​2​/2​ -​ x​1​2
du​1​(x​1​,x​2​)/dx​1​ = 0 => max(x​1​) = 3x​2​/4
Similarly, max(x​2​) = 3x​1​/4
At Nash equilibrium, max(x​1​) = max(x​2​) => x​1​ = x​2 ​= 0
ii) ​f(x​1​,x​2​) = 4x​1​x​2​, c(x​i​) = x​i
u​1​(x​1​,x​2​) = 2x​1​x​2 -​ x​1
du​1​(x​1​,x​2​)/dx​1​ = 2x​2 ​- 1
So minimum of this function will be at x​1 = ​ 0, and maximum will be at x​1 = ​ 1
Similarly, for payoff of x​2​, minimum of this will be at x​2 = ​ 0, and maximum
will be at x​2 = ​ 1, and where x​1​ = ½ or x​2​ = ½.
So there are 3 Nash equilibria, x​1 = ​ x​2 =
​ 0, x​1 =
​ x​2 =
​ 1, x​1 =
​ x​2 =
​ ½

Q6)

P​1​/P​2 A B C
A 5,5 1,5 1,1
B 5,1 7,2 2,7
C 1,1 2,2 7,0

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