Problem Set 8

1. Assume that every correlated strategy of a strategic form game is individ-

ually rational. Then prove that vi = mins∈S ui (s) for all i. (Hint: Assume
that vi is not the minimum, and show that there exists a correlated strat-
egy that is not individually rational.)
2. Show that all utilities of the form (λu1 +(1−λ)u′1 , λu2 +(1−λ)u′2 , . . . , λun +
(1 − λ)u′n ) for any λ ∈ [0, 1],
(a) are achievable by correlated strategies, if the utilities (u1 , . . . , un ) and
(u′1 , . . . , u′n ) are achievable by correlated strategies.
(b) are achievable by individually rational correlated strategies, if both
(u1 , . . . , un ) and (u′1 , . . . , u′n ) are achievable by individually rational
correlated strategies.
(c) are achievable by correlated equilibria, if (u1 , . . . , un ) and (u′1 , . . . , u′n )
are achievable by correlated equilibria.

(Note: This proves that all three sets mentioned above are convex.)
3. Prove that all the utilities achievable by mixed strategies can be achieved
by correlated strategies also.
4. Construct a strategic form game where

(a) no two strategy profiles give the same utility to a player, and
(b) the set of utilities achievable by mixed strategies and correlated
strategies are the same.
5. Prove that all MSNE’s of a strategic form game are correlated equilibria.

6. In a strategic form game having a strongly dominant strategy equilibrium

(SDSE), prove that the only correlated equilibrium is the SDSE profile.
7. Consider a bargaining problem (F, v). Define x∗ as the maximum value
of x such that (v1 + x, v2 + x) ∈ F . Let the solution be

f (F, v) = (v1 + x∗ , v2 + x∗ ).

Which of the five properties does this solution satisfy?

1
 8. Consider a bargaining problem (F, v). Define b1 = max(x1 ,x2 )∈F x1 , and
b2 = max(x1 ,x2 )∈F x2 . Let the solution f (F, v) be the member of F on the
line connecting (v1 , v2 ) and (b1 , b2 ) for which x1 and x2 are as large as pos-
sible. Show that this solution satisfies every property except independence
of irrelevant alternatives.

9. Find the Nash bargaining solution for the individually rational correlated
strategies of all the three games below. Assume the security value (v1 , v2 )
to be the breakdown point.

HH P2 NC
H
C
P1 HH
NC 2, 2 0, 6
C 6, 0 1, 1

HH P2
H
A B
P1 HH
A 1, 1 0, 1
B 1, 0 0, 0

HH P2
H L M R
P1 HH
T 7, 2 2, 7 3, 6
B 5, 4 6, 3 4, 5

10. Consider a 5-player game, where player 1 is the big player, and the others
are small players. A coalition with the big player and one of the small
players give a utility of 1, and that between all the small players also give
a utility of 1. The grand coalition gives a utility of 2. Compute the core
of this game. What happens if the grand coalition gives a utility of 1?
11. There are four service providers in the following transportation network.
The service provider, and the cost he incurs in transporting along the link,
is mentioned near each link in the figure below. Transportation from the
source to the terminal (S–T) generates a revenue of 100. Formulate this
as a TU game, and compute the core.

2
 3,5
A C

0
3,15

10
1,

2,
4,0

15
S E T

10
1,
2,
3,10

15

0
B D

1,4
12. Consider a version of divide the dollar problem with 4 players and an
amount of 400. Any coalition with three or more players can get the total
amount. Also, a coalition with two players can get the total amount only
if player 1 is a part of the coalition. Compute the core and Shapley value
of this TU game.
13. Consider a constant sum TU game where v(C) + v(N \C) = c for any
C ⊆ N , where c is some constant. What is the condition for the core to
be non-empty?
14. Consider gloves market game, with N left glove and M right glove manu-
facturers. A coalition with y1 left glove and y2 right glove manufacturers
obtain a utility of min(y1 , y2 ). Prove that the Shapley value
(a) ϕ(v) = ( 32 , 16 , 16 ) when (N, M ) = (1, 2),
13 13 7 7 7
(b) ϕ(v) = ( 20 , 20 , 30 , 30 , 30 ) when (N, M ) = (2, 3),
1
(c) ϕi (v) = 2 for all i, when N = M .
15. Consider the legislature game where six parties have 75, 74, 43, 19, 16,
and 16 seats in a 243-member legislative assembly. The coalition whose
sum of seats is at least 122 gets a utility of 100. Prove that the Shapley
value is (30, 30, 20, 20 20 20
3 , 3 , 3 ).

16. Consider a two-player strategic form game Γ =< {1, 2}, (Si ), (ui ) >. Con-
struct a TU game such that v({i}) equals the security value of player i,
and v(12) = maxs∈S (u1 (s) + u2 (s)). Give an example where Nash bar-
gaining solution and Shapley value are equal, and an example where they
are not equal.