HUL 320: Problem Set 1

February 9, 2024

• Question 1
Find all the pure and mixed Nash equilibria of the game in figure 1. Also,
plot the best responses for both the players, superimpose and label all the
equilibria.

Figure 1: A Game

• Question 2

Let Γ be a game in strategic form and sj be a weakly dominated strategy

′
for Player j in this game. Denote by Γ the game derived by eliminating
′
strategy sj from Γ. Then, show that every Nash equilibrium of Γ is also
a Nash equilibrium of Γ.

Definition: In game ΓN = [I, {∆Si }, {∆ui (.)}], strategy αi is a best

response for a player i to his rivals’ strategies α−i if
′
ui (αi , α−i ) ≥ ui (αi , α−i )

′
for all αi ∈ {∆Si }. Strategy αi is a never best response if there is no α−i
for which αi is a best response.

1
• Question 3

State whether following claims are true or false. Prove if true or give a
counterexample if false.

– Every strictly dominated strategy is a never best response.

– Every never best response strategy is a strictly dominated strategy.

Definition: A function, f : X → R (where X is a convex subset of a

linear space) is quasiconvex iff

f (tx + (1 − t)y) ≤ min{f (x), f (y)}

for any x, y ∈ D, t ∈ [0, 1]. For strict quasiconvexity, the inequality will
be strict.

• Question 4

Consider a simultaneous-move game with normal form

ΓN = [I, {∆Si }, {∆ui (.)}].

Suppose that, for all i, Si is a convex set and ui (.) is strictly quasiconvex.
Show that any mixed strategy Nash equilibrium of this game must be de-
generate, with each player playing a single pure strategy with probability
1.

• Question 5

Consider a bargaining solution in which two individuals are considering

a joint venture that will earn them 100 dollars in profit, but they must
agree on how to split the 100 dollars. Bargaining works as follows: The
two individuals each make a demand simultaneously. If their demands
sum to more than 100 dollars, then they fail to agree, and each gets noth-
ing. If their demands sum to less than 100 dollars, they do the project,
each gets his demand, and the rest goes too charity. Individuals do not
value charity.
– What are each players strictly dominated strategies?
– What are each players weakly dominated strategies?
– What are the pure strategy Nash equilibria of the game?

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• Question 6
′
Let Γ and Γ be two normal-form games with the same number of play-
ers and the same set of actions for every player. Suppose that for every
player i = 1, ........., n, there exist two numbers Ai > 0 and Bi such that
i (a) = Ai ui (a) + Bi for every action profile a ∈ A. Show that a strategy
ug
profile α is a Nash equilibrium of Γ if and only if α is a Nash equilibrium
′
of Γ .

Definition: An allocation x = {x1 , x2 , x3 , ....., xn } is Pareto efficient if

and only if there exists no x′ such that

ui (x′ ) ≥ ui (x), ∀i.

holds and with strict inequality for some i.

An allocation x′ is Pareto inefficient if there exists at least one alloca-

tion x dominating it.

• Question 7

Consider a n-player simultaneous move game where each player i chooses

an effort level ai ∈ [0, 1]. Efforts are costly with a unit cost of 2. Ef-
forts are also complementary. Payoff for each player i is given by πi =
4min{a1 , a2 , a3 , ....an } − 2ai .

– Find all the pure-strategy Nash equilibria and prove that they are
indeed Nash equilibria.
– Are any of the Nash equilibria Pareto efficient?
– Find a Nash equilibrium where each player gets a payoff of 1.

Definition: A two-player game is symmetric if the two players have the

same strategy set S1 = S2 and the payoff functions satisfy u1 (s1 , s2 ) =
u2 (s2 , s1 ) for each s1 , s2 ∈ S1 .
• Question 8

Prove that the set of equilibria of a two-player symmetric game is a sym-

metric set: if (s1 , s2 ) is an equilibrium, then (s2 , s1 ) is also an equilibrium.

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• Question 9

Consumers are uniformly distributed along a boardwalk that is 1 mile

long. Ice-cream prices are regulated, so consumers go to the nearest ven-
dor because they dislike walking (assume that at the regulated prices all
consumers will purchase an ice cream even if they have to walk a full mile).
If more than one vendor is at the same location, they split the business
evenly. Consider a game in which three ice cream vendors pick their lo-
cations simultaneously. Show that with three vendors, no pure strategy
Nash equilibrium exists. What if 4 ice cream vendors are there? [Note:
The case of two vendors has been covered in the class.]

• Question 10

Three countries (A, B, C) must simultaneously decide whether to declare

war on country D. If two or three declare war, they will win easily, and
the countries that declared war will share a bounty of 100 divided into
equal parts. If only one declares war, it will lose and will suffer a cost
estimated at 30. Countries that do not declare war do not win or lose
anything. Find the pure strategy Nash equilibria.