GAMES AND STRATEGIES 2022

Week 7: Potential Games

• Non-strategic games, Common payoff games and Diff-equivalent payoff.

• Build potential function and check if a game is potential.

• Better-response dynamics

• Congestion game

• Price of Anarchy of games and the Price of Stability.

Exercise 1. 1. For each of the following game say if it is zero-sum, common payoffs and/or
non-strategic (several possible answers)

L M R L M R L M R
T 3,3 1,1 2,2 T 3,-3 1,-1 -3,3 T 3,1 1,1 2,1
A) B) C)
M 4,4 5,5 1,1 M 4,-4 0,0 2,-2 M 3,2 1,2 2,2
B 2,2 6,6 2,2 B -1,1 -6,6 - 1,1 B 3,3 1,3 2,3

L M R L M R L M R
T 1,2 1,3 1,4 T 0,0 ,0,0 0,0 T 6,-2 2,0 -1,4
D) E) F)
M 5,2 5,3 5,4 M 0,0 0,0 0,0 M 7,-2 1,2 4,0
B 6,2 6,3 6,4 B 0,0 0,0 0,0 B 2,4 -5,9 1,4

2. Determine if B) and F) are diff-equivalent.

Exercise 2. Consider the following game G,

L M R
T 3,3 1,1 3,2
M 4,5 5,6 2,2
B 2,1 7,6 2,1

• Is the game potential?

• If it is, give the potential function P such that P (T, M ) = 0.

• Give a run of the Best-reply dynamic from (T, R).

Exercise 3. Consider the following game G,

L M R
T 3,3 1,1 3,2
M 4,5 5,6 2,2
B 2,1 7,6 3,1

• Is the game potential?

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 • If it is, give the potential function P such that P (T, M ) = 0.

• Give a run of the Best-reply dynamic from (T, R).

Exercise 4. Consider the following game G,

L M R
T 2,0 1,1 5,2
M 1,1 0,2 3,2
B 3,1 2,2 4,1

1. Is the game potential?

2. If it is, give the potential function P such that P (B, L) = 0.

3. Give a run of the Best-reply dynamic from (T, R).

Exercise 5. Find x such that the following game is a potential game,

L R
T 3,3 2,5
B 4,x 0,7

Exercise(*) 6. Consider the following game,

1 2 3 4 5
α 2,0 2,1 7,5 0,2 6,3
β 3,2 3,a 2,1 6,9 2,0
δ 2,1 6,6 5,4 b,6 3,1
γ 8,8 8,9 3,3 3,7 c,4

where a, b, c are real numbers.

(a) Find all pure Nash equilibria, for all values of a, b and c

(b) Find the values of a, b, c such that the game is a potential game and compute a potential
function.

Exercise(*) 7. Consider the Cournot duopoly model with symmetric firms. Firm 1’s and
firm 2’s unit cost is equal to c and given that the quantity Q = q1 + q2 is produced, the price
is determined by the inverse demand function is given by D(Q) = a − bQ. We restrict the
production to [0, ab ].

1. Find the utility functions of Firm 1 and Firm 2.

2. Recall the link between diff-equivalent games and potential games.

3. Verify that the following function is a potential function for the Cournot game:

P (q1 , q2 ) = a(q1 + q2 ) − b(q12 + q22 ) − bq1 q2 − c(q1 + q2 )

Exercise 8. Consider the following routing game with origin O and destination D and the costs
indicated in the figure below. We assume that there are 10 players.

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 cT (nT ) = nT

O D

cB (nB ) = 10

1. Give two different types of Equilibria (with different social costs) and compute their social
costs.

2. Find the optimal solution.

3. Deduce the PoA.

Exercise 9. Consider the following routing game with origin O and destination D and the costs
indicated in the figure below. We assume that there are 100 players.

cT (nT ) = 3nT

O D

cB (nB ) = nB + 50

1. Find the optimal solution.

2. Give one Nash equilibrium.

3. Deduce a lower bound on PoA.

Exercise 10. Consider the following routing game with origin O and destination D and the
costs indicated in the figure below. We assume that there are 100 players.

cT (nT ) = nT

O D

cB (nB ) = nB + 20

1. Find the optimal solution.

2. Give one Nash equilibrium.

3. Deduce a lower bound on PoA.

Exercise(*) 11. We consider the following notion. Let {1, · · · , n} be a set of players. For
every i ∈ {1, · · · , n}, let Xi be the set of strategies of player i and let ui be the utility of player
i.

Let Q be a function from X1 × ... × Xn to R. We say that Q is an ordinal potential for the game
if for all i ∈ {1, .., n}

∀x−i ∈ X−i , ∀xi , x′i ∈ Xi , ui (xi , x−i ) − ui (x′i , x−i ) ≥ 0 iff Q(xi , x−i ) − Q(x′i , x−i ) ≥ 0.

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1. Prove that if a finite game admits an ordinal potential then it admits a pure Nash equilib-
rium.

2. Recall the definition of a potential.

3. Let us consider n = 2, X1 = {T, B} and X2 = {L, R}, show that if a game admits a
potential, then

(u1 (T, L)−u1 (B, L))+(u2 (T, R)−u2 (T, L))+(u1 (B, R)−u1 (T, R))+(u2 (B, L)−u2 (B, R)) = 0.

4. Prove that the following game admits an ordinal potential but no potential.

L R
T 2, 2 0, 3
B 3, 0 1, 2