Lecture 3

Game Theory: Best Reply and Nash
Assoc. Prof. Ayman Ghoneim
Operations Research and Decision Support Department

Faculty of Computers and Artificial Intelligence, Cairo University
Contact Email: a.ghoneim@fci-cu.edu.eg
Game Theory (DS414/DS411) - 2024
Ayman Ghoneim (FCAI - Cairo University) Game Theory: Best Reply and Nash Spring 2024 1 / 26
Recall: Strictly and Weakly Dominated Strategies
Definition (Strictly Dominated Strategy)

Player i strategy s0i is strictly dominated by player i strategy si if
ui (si , s−i ) > ui (s0i , s−i ) for all possible s−i .
Definition (Weakly Dominated Strategy)

Player i strategy s0i is weakly dominated by player i strategy si if
ui (si , s−i ) ≥ ui (s0i , s−i ) for all possible s−i , and ui (si , s−i ) > ui (s0i , s−i ) for at
least one s−i .
Recall: Dominated Strategy
Let’s consider the following payoff matrix:
Player 2
L C R
U 7,4 11,3 2,0
Player 1 D 6,1 0,2 2,0
For player 1: Strategy U weakly dominates strategy D, since 7 > 6, 11 > 0

and 2 = 2.
For Player 2: Strategy L strictly dominates strategy R, since 4 > 0 and 1 > 0.
For Player 2: Strategy C strictly dominates strategy R, since 3 > 0 and 2 > 0.
Best Response
Let’s consider the following payoff matrix:
Player 2
L R
U 5,1 0,2
Player 1 M 1,3 4,1
D 4,2 2,3
This game is not a dominant solvable game.

If you are player 1, what strategy will you choose ? Can you rationalize your
choice ?
U is best reply to L. I will choose U if i think that player 2 will choose L.

M is best reply to R. I will choose M if i think that player 2 will choose
R.
I can choose D, it is safer (minimize the difference between my payoffs).
Best Response
What if i believe that player 2 will play strategies L or R with equal

probabilities, i.e., will play L or R with probability of 0.5 each ?
Here, i can compute the expected payoff of each of my strategies:
E(U) = 0.5 × 5 + 0.5 × 0 = 2.5
E(M) = 0.5 × 1 + 0.5 × 4 = 2.5
E(D) = 0.5 × 4 + 0.5 × 2 = 3

Thus, strategy D yields the highest expected payoff (maximizes player 1
expected payoff) when player 1 believes that player 2 will play L or R with
equal probabilities.
Best Response
The generalization of the previous equations in terms of the probability P(R)

of playing strategy R by player 2 are:
E(U, P(R)) = (1 − P(R)) × 5
E(M, (P(R))) = (1 − P(R)) × 1 + P(R) × 4
E(D, P(R)) = (1 − P(R)) × 4 + P(R) × 2
Best Response
Should I repeat the previous calculation for each possible belief about player
2, i.e., each possible probability vector to play L and R ?
We can draw the expected payoff of strategy U in terms of the probability
P(R) of playing strategy R by player 2.
If P(R) = 0, then playing U will yield a payoff of 5.
If P(R) = 1, then playing U will yield a payoff of 0.
Figure: Expected Payoff of strategy U.

Best Response
Similarly, we can draw the expected payoff of strategy M in terms of the
probability P(R) of playing strategy R by player 2.
If P(R) = 0, then playing M will yield a payoff of 1.
If P(R) = 1, then playing M will yield a payoff of 4.
Figure: Expected
Ayman Ghoneim (FCAI - Cairo University) Payoff
Game Theory: of strategies
Best Reply and Nash U and M. Spring 2024 8 / 26
Best Response
Similarly, we can draw the expected payoff of strategy D in terms of the
probability P(R) of playing strategy R by player 2.
If P(R) = 0, then playing D will yield a payoff of 4.
If P(R) = 1, then playing D will yield a payoff of 2.
Figure: Expected
Ayman Ghoneim (FCAI - Cairo University) GamePayoff ofReply
Theory: Best strategies
and Nash U, M and D. Spring 2024 9 / 26
Best Response
Thus, if P(R) is from 0 to x, then my best response is U. If P(R) is from x to y,
then my best response is D. If P(R) is from y to 1, then my best response is M.
Figure: What to play given P(R).
Best Response
Let’s consider the penalty kicking game, which happens better a shooter and a
goalie.
The shooter can place the ball to the right, middle or the left, while the goalie
can go to the right or the left.
Goalie
L R
L 4,-4 9,-9
Shooter M 6,-6 6,-6
R 9,-9 4,-4
The payoffs read as follows. For instance, if the shooter places the ball to the
left and the goalie goes to the left, there is a 40% chance of scoring.
Notice that there are no any dominated strategies in the penalty kicking payoff
matrix.
Best Response
When drawing the expected payoff of each strategy in terms of the probability
P(R) that the goalie will go to the right, we can see that strategy M is not a
best response to any value for P(R).
Figure: Where to shoot given P(R).
Best Response
What is missing in this penalty kicking model ?
The goalie may stay in the middle.

Kicking up or down.
Speed of shooting. (it lowers the probability of scoring when shooting
left or right because the shooter may miss, and increase the probability
when shooting to the middle)
Ignoring that right footed players find it easier to shoot to the left.
Best Response
Formal Definitions:
Definition (Best Response to Strategies)
Player i strategy ŝi is a best response to the strategies of other players s−i if
ui (ŝi , s−i ) ≥ ui (s0i , s−i ) for all possible s0i ∈ Si , i.e., ŝi solves maxsi ui (si , s−i ).
Definition (Best Response to Belief)

Player i strategy ŝi is a best response to the belief p about other players
strategies if E[ui (ŝi , p)] ≥ E[ui (s0i , p)] for all possible s0i ∈ Si , i.e., ŝi solves
maxsi E[ui (si , p)].
Nash Equilibrium
A strategy profile s is a Nash equilibrium if all the strategies in s are best

replies for each other.
Example - Let’s consider the Prisoners Dilemma Game:
Figure: Prisoners Dilemma.
Strategy D of player 1 is the best reply for strategy D of player 2, and strategy
D of player 2 is the best reply for strategy D of player 1. Thus, the strategy
profile s = (D, D) is a Nash equilibrium.
Nash Equilibrium
Formal Definition:
Definition (Nash Equilibrium)

A strategy profile s = (s∗1 , . . . , s∗n ) is a Nash equilibrium if for each player i,
the choice s∗i is the best response to the other player choices s∗−i .
Nash Equilibrium
A game may have multiple Nash equilibria:
Player 2
L R
U 3,3 0,2
Player 1 D 2,0 1,1
Here (U, L) and (D, R) are both Nash equilibria of the game.
Nash Equilibrium
A game may have NO pure Nash equilibria at all:
Player 2
L R
U 3,3 0,4
Player 1 D 2,2 1,1
Here no strategy profile is a pure Nash equilibrium.
Nash Equilibrium and Dominance
There are obvious relations between the dominance concept and the Nash
Equilibrium:
A strategy profile s at a Nash equilibrium can never contain a strictly

dominated strategy for one of the players.
However, a strategy profile s at a Nash equilibrium may contain weakly

dominated strategies.
Strict Nash Equilibrium
A refinement of Nash Equilibrium is the strict Nash Equilibrium.

A Nash equilibrium is called strict if each component strategy si is the unique
best reply to the other strategies in s.
Definition (Strict Nash Equilibrium)

s = (si , s−i ) is strict Nash equilibrium if for each i and all s0i 6= si :
ui (si , s−i ) > ui (s0i , s−i ).
Nash equilibrium criterion requires that no unilateral deviation should be

profitable, while strict Nash equilibrium requires that all such deviations be
costly.
Strict Nash Equilibrium
Consider the following payoff matrix:
Player 2
L R
U 1,1 0,0
Player 1 D 0,0 0,0
Here (U, L) and (D, R) are both Nash equilibria of the game. However, (U, L)
is a strict Nash equilibrium. For (D,R), deviating from the equilibrium is not
costly for both players.
Investment Game
You will play an investment game with your classmates !!!

Your two strategies are not to invest (invest 0 L.E.) or invest 10 L.E.
Your payoff is as follows:
If you didn’t invest, then you will get 0 L.E.

If you invested and more than or equal to 90% of the class invested, then
you will get 15 L.E.
If you invested and less than 90% of the class invested, then you will get
0 L.E.
Investment Game
What are the Nash equilibria of this game ?

A very useful approach here is to “Guess and Check".
Nash equilibria of the game:
No body invests.
All people invest.
Investment Game
It is clear that the Nash equilibrium of "All people invest" is better than the
"No body Invests" Nash equilibrium.
The "All people invest" Nash is Pareto efficient. We saw that before in the
prisoners’ dilemma game where (C, C) Pareto dominates (i.e., better for both
players) than (D, D).
It is easy to reach the "All people invest" Nash equilibrium using
communication, i.e., if each player is convinced that other players will invest,
then the player will invest.
This is different than another games such as the prisoners’ dilemma game,
i.e., if a player is convinced that the other player will cooperate, then the
player will defect.
The investment game we are discussing now is actually a coordination game.
Coordination Games
In coordination games:
Communication helps to reach a better equilibrium.
The Nash equilibrium in coordination games is a self-enforcing

agreement. (This differs from the prisoners’ dilemma game.)
Leadership in teams actually helps a team members to coordinate their

efforts.
Coordination Games
Given the following payoff matrix (the battle of the sexes game):
Player 2
L R
U 2,1 0,0
Player 1 D 0,0 1,2
To coordinate is better than not to coordinate, however, there is a conflict

regarding which situation to coordinate about since player 1 prefers (U, L)
and player 2 prefers (D, R).

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Game Theory: Best Reply and Nash

Assoc. Prof. Ayman Ghoneim

Operations Research and Decision Support Department

Game Theory (DS414/DS411) - 2024

Definition (Strictly Dominated Strategy)

Definition (Weakly Dominated Strategy)

Let’s consider the following payoff matrix:

For player 1: Strategy U weakly dominates strategy D, since 7 > 6, 11 > 0

This game is not a dominant solvable game.

U is best reply to L. I will choose U if i think that player 2 will choose L.

What if i believe that player 2 will play strategies L or R with equal

E(U) = 0.5 × 5 + 0.5 × 0 = 2.5

E(M) = 0.5 × 1 + 0.5 × 4 = 2.5

E(D) = 0.5 × 4 + 0.5 × 2 = 3

The generalization of the previous equations in terms of the probability P(R)

E(U, P(R)) = (1 − P(R)) × 5

E(M, (P(R))) = (1 − P(R)) × 1 + P(R) × 4

E(D, P(R)) = (1 − P(R)) × 4 + P(R) × 2

Figure: Expected Payoff of strategy U.

Figure: What to play given P(R).

Figure: Where to shoot given P(R).

What is missing in this penalty kicking model ?

The goalie may stay in the middle.

Definition (Best Response to Belief)

A strategy profile s is a Nash equilibrium if all the strategies in s are best

Figure: Prisoners Dilemma.

Definition (Nash Equilibrium)

A game may have multiple Nash equilibria:

A game may have NO pure Nash equilibria at all:

Here no strategy profile is a pure Nash equilibrium.

A strategy profile s at a Nash equilibrium can never contain a strictly

However, a strategy profile s at a Nash equilibrium may contain weakly

A refinement of Nash Equilibrium is the strict Nash Equilibrium.

Definition (Strict Nash Equilibrium)

Nash equilibrium criterion requires that no unilateral deviation should be

Consider the following payoff matrix:

You will play an investment game with your classmates !!!

If you didn’t invest, then you will get 0 L.E.

What are the Nash equilibria of this game ?

Communication helps to reach a better equilibrium.

The Nash equilibrium in coordination games is a self-enforcing

Leadership in teams actually helps a team members to coordinate their

To coordinate is better than not to coordinate, however, there is a conflict

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