Scribd
Upload
8 views2 pages

Game Theory Strategies in Parenting

The document discusses a game theory problem involving a parent and child with a payoff matrix. It analyzes the incentives for strategic moves, concluding that the child has a dominant strategy to be bad while the parent has a dominant strategy not to punish, leading to a potential equilibrium of (B, N). The parent can improve their outcome by making a credible threat to punish if the child chooses to be bad, which can shift the equilibrium to (G, N).

Uploaded by

Ibrahima Diallo
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
8 views2 pages

Game Theory Strategies in Parenting

The document discusses a game theory problem involving a parent and child with a payoff matrix. It analyzes the incentives for strategic moves, concluding that the child has a dominant strategy to be bad while the parent has a dominant strategy not to punish, leading to a potential equilibrium of (B, N). The parent can improve their outcome by making a credible threat to punish if the child chooses to be bad, which can shift the equilibrium to (G, N).

Uploaded by

Ibrahima Diallo
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

Econ 487

Problem Set 8 (Chapter 8)

1. Consider a game between parent and a child. The child can choose to be good (G) or
bad (B); the parent can punish the child (P) or not (N). The payoff matrix is given by:

Parent

P N

B –1, –3 1, –2
Child
G –2, –1 0, 0

(a) Is there any incentive for either player to use a strategic move?
(b) What strategic move may work?

2. S2

Solutions:
1. (a) Both players have dominant strategies – B for Child and N for Parent. So no matter
the game is played simultaneously or sequentially, the equilibrium will be (B, N). The Child
gets his best outcome but the Parent doesn’t. (From the Parent’s perspective, the best
outcome is (G, N).) So, the Parent has an incentive to make a strategic move to get his best
outcome.
(b) A commitment will not work for the Parent since there is no first mover advantage
for the Parent to gain in this game. A promise of “if you choose G, then I’ll choose N” will
not work because the child knows that the Parent is going to choose N if he choose G; there
is no need for a promise here. But a threat of “if you choose B, then I’ll choose P”, if made
credible, can get the Parent his best outcome.
Draw a two-stage game similar to the one in the US-Japan trade game we did in class
to see this. In this two stage game, in the first stage the Parent will decide whether or not to
threat; if the Parent decides not to threat, then in the second stage the original game is played
in which (B,N) is the equilibrium; if the Parent decides to threat, then in the second stage a
sequential game is played in which the Child moves first and the Parent moves second. If the
threat is credible, it will prune out the N branch when B is chosen. Now, if you apply
rollback you’ll get (G, N) as the equilibrium.

2.
(i) (a) There are two pure-strategy equilibria (Down, Left) and (Up, Right). (There is also a
mixed-strategy equilibrium which we don’t need to worry about here, because in strategic
moves we are only concerned about pure strategies.)

Page 1 of 2
(b) If Row commits to Up, he ensures himself a payoff of 2. Similarly, if Column
commits to Left, he ensures himself a payoff of 2.

(ii) (a) Both players have dominant strategies; equilibrium: (Up, Right); payoffs (3, 4).
(b) Row can achieve his best payoff of 4 by using the threat Down if Right.

(iii)(a) Both players have dominant strategies; equilibrium: (Up, Right); payoffs (2, 2).
(b) Either player can make a promise that moves the game to (Down, Left) and payoffs to
(3, 3). Row can promise Down if Left; Column can promise Left if Down.

(You can draw two-stage games in all the above situations to analyze the strategic moves
formally. Please practice these. Please talk to me if you’re not sure how to do these.)

Page 2 of 2

You might also like