Scribd
Upload
20 views6 pages

Dominance Strategies in Game Theory

The document contains 6 problems involving game theory and iterated deletion of strictly dominated strategies. For each problem, the document identifies the strategies that survive iterated deletion. It provides the sets of strategies at each iteration according to the formal definition. It also explains rationality considerations and identifies mixed strategies that dominate pure strategies.

Uploaded by

Sanan Aliyev
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
20 views6 pages

Dominance Strategies in Game Theory

The document contains 6 problems involving game theory and iterated deletion of strictly dominated strategies. For each problem, the document identifies the strategies that survive iterated deletion. It provides the sets of strategies at each iteration according to the formal definition. It also explains rationality considerations and identifies mixed strategies that dominate pure strategies.

Uploaded by

Sanan Aliyev
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Rudolf Kerschbamer

Game Theory
Problem Set 2
Dominance
Name: _ _ _ _ _ _ _ _ _ _ _

2.1 Which strategies in the following normal-form game survive the iterated deletion of
strictly dominated strategies? For every step of elemination, state explicitely which
strategies are strictly dominated by which strategies. Then provide the collection of
sets {{Ati}i ∈ N }Tt=0 according to the formal definiton of iterated deletion of strictly
dominated strategies (Definition 11b).

A B C

a 2, 0 1, 1 4, 2

b 3, 4 1, 2 2, 3

c 1, 3 0, 2 3, 0

- Remove "c" (dominated by "a");


- Remove "B" (dominated by "C").

Survive: "a" and "b" for row player, respectively "A " and "C" for the column player.
2.2 Which strategies in the following normal-form game survive the iterated deletion of
strictly dominated strategies? For every step of elemination, state explicitely which
strategies are strictly dominated by which strategies. Then provide the collection of
sets {{Ati}i∈N}Tt=0 according to the formal definiton of iterated deletion of strictly
dominated strategies (Definition 11b).

A B C D E F

a 0, 10 0, 10 0, 10 0, 10 0, 10 0, 10

b 8, 2 2, 8 2, 8 2, 8 2, 8 2, 8

c 8, 2 5, 5 4, 6 4, 6 4, 6 6, 4

d 8, 2 5, 5 3, 7 6, 4 6, 4 6, 4

e 8, 2 5, 5 3, 7 1, 9 8, 2 6, 4

f 8, 2 4,9 3, 7 1, 9 1, 9 3, 7

- Remove "A" (dominated by everything else) and "F" (dominated by "B");


- Remove "a" (dominated by everything else), "b" (dominated by "c" and "d") and "f" (dominated
by "c", "d" and "e");
- Remove "E" (dominated by "D") and "B" (dominated by "C");
- Remove "e" (dominated by "c" and "d");
- Remove "D" (dominated by "C");
- Remove "d" (dominated by "c").

Survive: "c" for the row player and "C" for the column player.
2.3 What does player 1 need to know about player 2 to make sure that the bavior assued
for him in the solution to exercise 2.1 is rational for him. What does player 2 need to
know about player 1 to make sure that the bavior assued for her in the solution to
exercise 2.1 is rational for her.

Player 1 doesn't need to know anything about Player 2 since he only avoids playing a
strictly dominated strategy. Player 2 needs to know that Player 1 is rational and knows
the game, so that he will avoid playing "c".
2.4 (Beauty Contest) Two agents play the following game: Each player privately writes a
positive integer between zero and one hundret (s1, s2 {0, 1, …, 99, 100}) on a sheet
of paper. An impartial arbitrator collects the sheets and computes the arithmetic mean
of the chosen numbers, z = (s1 + s2)/2. The player whose number is closest to half of
the mean (z/2) wins. If both players write down the same number both win with equal
probability. Are there strictly dominant strategies in this game? Are there any strictly
dominated strategies? Solve the game by iterated deletion of strictly dominated
strategies.

If the two numbers are equal then both players win 0.5 units; otherwise, the smaller
number always wins 1 unit and the other one 0. The strategy "s=0" is dominating all
other strategies for both players.
2.5 (Cournot Competition) In a homogeneous products market with inverse demand
given by P(x) = max {1-x, 0} two firms (i = 1,2) compete by simultaneously choosing
output quantities s1 and s2 (where x = s1 + s2). Both firms have the same cost function
C(si) = si/10. Assume that the competitors can choose only between quantities of
0.225, 0.3 and 0.45 (s1, s2 {0.225, 0.3, 0.45}). Represent this situation as a game in
normal-form and solve it by iterated deletion of strictly dominated strategies. Use
eight-hundreth fractions for displaying payoffs, for example write 81/800 instead of
0.10125.
Compute the payoffs as follows:
Pi(S1,S2) = [1 - (S1+S2) - 0.1] * Si = [0.9 - (S1+S2)] * Si.

So obtain the following game:

81.0, 81.0 67.5, 90.0 40.5, 81.0


90.0, 67.5 72.0, 72.0 36.0, 54.0
81.0, 40.5 54.0, 36.0 00.0, 00.0

For Player 1 the last row (corresponding to 0.45) is strictly dominated by the second
one; by symmetry, for Player 2 the last column is dominated by the second one. So
the choice 0.45 is ruled out for both players.

Removing the last row and column yields the reduced game:

81.0, 81.0 67.5, 90.0


90.0, 67.5 72.0, 72.0

Again, for Player 1, the first row (corresponding to 0.225) is strictly dominated by the
second one and (symmetry) for Player 2, the first column is dominated by the second
one. Therefore one can also remove the first row and column to get a unique surviving
strategy profile (0.3,0.3) with a payoff of 72.0 for both players.
2.6 (Pure Strategies Dominated by Mixed Strategies) Consider the following normal-
form game:

L R

U 7, 0 3, 1

M 4, 4 5, 2

D 3, 3 8, 2

Is any of the pure strategies of one of the players strictly dominated by a mixed strategy? If
so, specify which pure strategy is strictly dominated by which mixed strategy (or strategies).

Strategy "M" for the row player is strictly dominated by the mixed strategy which picks either
"U" or "D" with equal probabilities (0.5). Indeed, 4 < (7+3)/2 and 5< (3+8)/2.

Common questions

Powered by AI

Game structure and rationality preclude certain strategies, such as strictly dominated ones, by guiding players through a logical evaluation of expected outcomes. In normal-form games, strategies like 'c' for the row player are removed due to their inferior payoff compared to 'a', while for the column player, strategies like 'B' are dominated by 'C'. Rational analysis thus leads to strategy preclusion, focusing players on the remaining feasible strategic choices that cannot be surpassed by others .

In strategic interaction as seen in the game of iterated deletion, Player 1 does not require any specific knowledge about Player 2 beyond understanding that no strictly dominated strategies will be played. Player 2 needs to know that Player 1 is rational and understands the game structure, ensuring Player 1 will not choose a strictly dominated strategy like 'c' .

Iterated deletion significantly simplifies a multi-strategy game by successively removing strategies that are inferior to others. This simplification is evident in a game with six strategies for each player, where iterated deletion reduces viable strategies down to one ('c' for the row player and 'C' for the column player). Initially, dominated strategies such as 'a', 'b', and 'f' for the row player, and 'D', 'E', and others for the column player, are systematically eliminated .

In a normal-form game, the strategies that survive iterated deletion of strictly dominated strategies are those which are not strictly dominated by any other strategy. For example, in the 2x3 normal-form game, the surviving strategies for the row player are 'a' and 'b', and for the column player, they are 'A' and 'C'. This is deduced by systematically removing dominated strategies: first 'c' is removed because it is dominated by 'a', and 'B' is removed because it is dominated by 'C' .

In the Beauty Contest game, iterated deletion of strictly dominated strategies leads both players to choose the strategy 's=0', which dominates all other strategies. This results because any non-zero number cannot be a best response when the opponent is expected to use a number smaller than the arithmetic mean, pushing the players towards the equilibrium of choosing zero .

It is unnecessary for a player to consider the entire strategy space because iterated deletion of strictly dominated strategies systematically eliminates those that are inferior, thus narrowing the focus to a smaller set of potential best responses. This process confirms that players need only consider strategies that cannot be dominated by any other available strategy .

Iterated deletion is justified in games like the Beauty Contest because it assists players in focusing on rational choices by reducing the complexity of potential strategies. Though the game might seem to allow many equilibria given the range of numbers players can choose, iterated deletion helps converge on a logical endpoint. By assuming rational actions and knowledge of payoff structures, players are driven to choose 's=0' which systematically dominates other strategic choices through iterative logic deductions .

The symmetry in the Cournot competition's strategic eliminations is highlighted as strategies like 0.45 are equally removed for both players since they are dominated by the choice of 0.3. The elimination is symmetric because both players have equivalent roles and cost functions within the game structure. This symmetry leads to the simplification of the strategy set for each player to the same remaining choice, culminating in an equilibrium payoff of 72.0 .

Mixed strategies can strictly dominate pure strategies. For instance, in the given normal-form game, the row player's strategy 'M' is strictly dominated by a mixed strategy which chooses 'U' or 'D' with equal probabilities. This follows since both 4 and 5 are less than the expected payoffs from the mixed strategy which are 5 (from (7+3)/2) and 5.5 (from (3+8)/2), respectively .

In Cournot competition involving firms choosing quantities simultaneously, the game is represented in normal form by defining strategies of different output levels. Iterated deletion is used to eliminate strategies such as 0.45, which are dominated by others like 0.3, simplifying the game to fewer strategic options. Ultimately, the unique surviving strategy profile is (0.3,0.3) providing both players with the same payoff of 72.0 .

You might also like