Module 1 Exercises
1. Specify the full set of pure strategies for each player the following games (Si ) and the set of pure
strategy profiles S.
A. Normal form game:
Table 1: A
Player 2
X Y Z
X (2, 2) (0, 2) (3, 1)
Player 1
Y (2, 0) (1, 1) (0, 0)
Z (1, 3) (0, 0) (1, 1)
B. Extensive-form game:
A B
2 2
C D E F
3
3, 2 6, 4
G H
3, 0 8, 5
C. Stackleberg (do Si only for this one): Suppose 2 identical firms produce a homogeneous good and
possess constant returns technology with average/marginal costs of c. Inverse market demand is
linear and given by p = 100 Q, where Q = q1 + q2 . Suppose that each firm selects qi 2 R+ , that
firm 1 selects q1 first, and that firm 2 selects q2 after observing q1 . Also, assume that all output
is sold at the market clearing price.
2. Consider the game depicted in Table 2. Specify the set of pure-strategy profiles satisfying each solution
concept. (Use mixed strategies to eliminate pure ones when necessary.)
Table 2: Problem 2
Player 2
X Y Z
X (2, 2) (0, 2) (3, 1)
Player 1
Y (2, 0) (1, 1) (0, 0)
Z (1, 3) (0, 0) (1, 1)
A. Iterated elimination of strictly dominated strategies.
B. Iterated elimination of weakly dominated strategies.
3. Each of two risk-neutral players i = 1, 2 simultaneously announces a nonnegative integer ai equal to
at most 100. If a1 + a2 100, then player i receives a payo↵ of ai . If a1 + a2 > 100 and ai < aj ,
then player i receives ai and player j receives 100 aj . If a1 + a2 > 100 and a1 = a2 then both players
receive 100 ai .
(a) If a player announces a specific value, ai , what is the highest payo↵ he can get (as a function of
ai )?
(b) Find the set A of pure strategies that are strictly dominated for each player.
(c) List the set of strategy profiles (a1 , a2 ) that give player 1 a payo↵ of 100.
(d) List the set of strategy profiles (a1 , a2 ) that give player 1 a payo↵ of 99.
(e) Specify the set, A⇤ , of strategy profiles surviving iterated elimination of strictly dominated strate-
gies.
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