Scribd
Upload
17 views2 pages

Microeconomics Game Theory Problem Set

The document is a problem set for a Microeconomics course focusing on game theory, specifically analyzing the 'split or steal' game from the TV show Golden Balls and its relation to the Prisoner's dilemma. It includes exercises on payoff matrices, dominant strategies, and the implications of strategy elimination in games. The document also references videos and external readings to enhance understanding of the concepts discussed.

Uploaded by

L PA
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
17 views2 pages

Microeconomics Game Theory Problem Set

The document is a problem set for a Microeconomics course focusing on game theory, specifically analyzing the 'split or steal' game from the TV show Golden Balls and its relation to the Prisoner's dilemma. It includes exercises on payoff matrices, dominant strategies, and the implications of strategy elimination in games. The document also references videos and external readings to enhance understanding of the concepts discussed.

Uploaded by

L PA
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

Problem Set 3

Economics I (Microeconomics)

uc3m

1. Golden Balls was a British TV show in which contestants had to do various tasks.
In the end the two finalists played a game of ’split or steal.’1

(a) Watch the video [Link] Pause after the


host explains the rules [min 2:00]. Draw the payoff matrix for the game.
What do you expect to happen? How does it relate to the pest control game
(Prisoner’s dilemma)? Watch the rest of the video. How does the outcome
square with your predictions? How do you explain this?
(b) Now watch the video: [Link]
How do you connect that video to what we have learned?
(c) Finally, read the explanation of what was going on between Nick and Ibrahim
on [Link] Do you think this is a good explana-
tion? If so, why? If not, why?

2. (from final exam 2018) Consider the following game show. There are two suitcases
(left and right). The left suitcase contains 100 Euros, the right suitcase contains 1
Euro. Two contestants (A and B) write down on a piece of paper which suitcase
they pick (left or right). After they have made their choice both contestants receive
the following payment
Amount in A’s pick
.
Amount in B’s pick
(a) Write down the payoff matrix for this game
(b) Determine the dominant strategies for each player or explain in 2 sentences
why there are none.

Assume now the rules change and each contestant receives the following payment
Amount in own pick
.
Amount in other contestant’s pick

(c) How would your answers from (a) and (b) change in this new game?
(d) Some people argue that the second type of game is very much like the pris-
oner’s dilemma. Would you agree? Which aspects are similar? Which aspects
are different?
1
If you are interested. The Economics Nobel Prize was given to Richard Thaler in
2017. He also has a study on the phenomenon of Golden Balls: [Link]
[Link]/doi/abs/10.1287/mnsc.1110.1413

1
3. Because dominated strategies are never chosen we can eliminate them from the
consideration set. Sometimes that elimination makes the game a lot simpler.
Consider e.g. the following game. Ana selects the row and Bob selects the column

a b c d
a 5,2 8,0 2,9 1,8
b 4,7 1,-1 1,0 0,5
c 6,0 9,0 1,1 3,0
d 0,0 8,0 3,2 2,1

(a) Do the following: eliminate a dominated strategy from the game. Look at
the remaining game and see if you can find another dominated strategy to
eliminate. Proceed until you cannot eliminate more dominated strategies.
What is your prediction on the outcome of that game?
(b) Has any player a dominant strategy in this game?
(c) Based on that exercise how would you describe the relationship between dom-
inant and dominated strategies in 5 sentences?

You might also like