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    EC 246: Decisions & Games

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    Parmesh Gupta
    The document describes two problems related to game theory: Problem 1 asks to determine Nash equilibria for a game between siblings Alice and Bob and between siblings Carl and Dora, where Alice and Bob are risk-neutral while Carl and Dora are risk-averse. Problem 2 asks to find a symmetric mixed-strategy Nash equilibrium where consumers randomize between claiming 11K, 12K, and 13K, and prove there are no equilibria if consumers randomize between only two strategies.

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    EC 246: Decisions & Games

    Uploaded by

    Parmesh Gupta
    41 views1 page
    The document describes two problems related to game theory: Problem 1 asks to determine Nash equilibria for a game between siblings Alice and Bob and between siblings Carl and Dora, where Alice and Bob are risk-neutral while Carl and Dora are risk-averse. Problem 2 asks to find a symmetric mixed-strategy Nash equilibrium where consumers randomize between claiming 11K, 12K, and 13K, and prove there are no equilibria if consumers randomize between only two strategies.

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    Decision and Games Problem Set

    Original Title

    Problem_Set_III

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    The document describes two problems related to game theory: Problem 1 asks to determine Nash equilibria for a game between siblings Alice and Bob and between siblings Carl and Dora, where Alice and Bob are risk-neutral while Carl and Dora are risk-averse. Problem 2 asks to find a symmetric mixed-strategy Nash equilibrium where consumers randomize between claiming 11K, 12K, and 13K, and prove there are no equilibria if consumers randomize between only two strategies.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    41 views1 page

    EC 246: Decisions & Games

    Uploaded by

    Parmesh Gupta
    The document describes two problems related to game theory: Problem 1 asks to determine Nash equilibria for a game between siblings Alice and Bob and between siblings Carl and Dora, where Alice and Bob are risk-neutral while Carl and Dora are risk-averse. Problem 2 asks to find a symmetric mixed-strategy Nash equilibrium where consumers randomize between claiming 11K, 12K, and 13K, and prove there are no equilibria if consumers randomize between only two strategies.

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    EC 246: Decisions & Games

    Problem Set III

    Problem 1: Two distinct pairs of siblings play the following “Extended Matching Pennies
    Game” – siblings Alice and Bob play against each other, and siblings Carl and Dora play
    against each other. The following matrix depicts the “money amount” that each player will
    receive in the game depending on the strategies played by the two players [so, strictly
    speaking, the following matrix is the outcome-matrix of the game, and not its payoff-matrix].
    Column Player
    Heads Tails Covered
    Row Player Heads 100, 00 00, 100 036, 036
    Tails 00, 100 100, 00 36, 036
    . Covered 036, 036 036, 036 036, 036
    It is commonly known that the siblings Alice and Bob are risk-neutral and have the same
    Bernoulli utility function: u(x) = x, and that the siblings Carl and Dora are risk-averse and
    have the same Bernoulli utility function: v(x) = + x.
    Determine all (pure-strategy and mixed-strategy) Nash equilibria of the game played between
    Alice and Bob, and of the game played between Carl and Dora.
    In so doing, convince yourself that while every player (irrespective of his/her risk attitude) will
    calculate expected utility of playing a particular strategy by using the formula “sum of
    probabilityBernoulli utility”, players with distinct risk attitudes indeed play a game differently.

    Problem 2: Consider the payoff matrix of “Claim Game 4”:


    Column Consumer
    claim 10K claim 11K claim 12K claim 13K
    claim 10K 10 , 10 11.025, 9.975 11.55 , 10.45 12.075 , 10.925
    Row
    claim 11K 9.975, 11.025 11 , 11 12.075, 10.925 12.6, 11.4
    Consumer
    claim 12K 10.45 , 11.55 10.925, 12.075 12 , 12 13.125, 11.875
    claim 13K 10.925, 12.075 11.4 , 12.6 11.875, 13.125 13 , 13

    Determine a symmetric mixed-strategy Nash equilibrium in which each player randomizes


    over the pure strategies: claim 11K, claim 12K, and claim 13K. In order to do this, solve for
    the non-negative vector {x, y, z} that satisfies the following equations:
    (1) x+y+z=1
    (2) 11x + 12.075y + 12.6z = 10.925x + 12y + 13.125z = 11.4x + 11.875y + 13z
    Next, make precise arguments as to (a) why there cannot exist a symmetric mixed-strategy
    Nash equilibrium in which each player randomizes over the pure strategies: claim 11K, and
    claim 12K; (b) why there cannot exist a symmetric mixed-strategy Nash equilibrium in
    which each player randomizes over the pure strategies: claim 11K, and claim 13K; and (c)
    why there cannot exist a symmetric mixed-strategy Nash equilibrium in which each player
    randomizes over the pure strategies: claim 12K, and claim 13K.

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