Problem set Game Theory

1) Suppose there are two firms in the market. Each of them has one job opening. firm 1 offers wage Rs. 16 and firm 2 offers wage 14. Imagine that there are two workers (worker 1 and worker 2) simultaneously decide whether to apply to firm 1 or firm 2. If one worker applies to a given firm, that worker gets the job; if both workers applies to the same firm then firm hires worker at random (i.e., with equal probability) and the other worker is unemployed. Write the normal form of the game (i.e., mention strategy set of the players and their pay-off functions) and find out Nash equilibrium of the game. 2) Consider a normal prisoner's dilemma game: NC 2,2 3,0 C 0,3 1,1

NC C

Now consider a little variant of this game. Each of two players has two possible actions: NC, C; each action pair results in the players's receiving amounts of money equal to the numbers corresponding to that action pair in above mentioned game (for example if player 1 chooses NC and player 2 chooses C, then player 1 receives nothing, whereas player 2 receives 3). The players are not selfish, rather the preferences of each player $i$ are represented by the payoff function mi(a)+ mj(a), where mi(a) is the amount of money received by player i when the action profile is (a,a), j is the other player, and is a non-negative number.( player 1's payoff to the action pair (NC,NC), for example is 2+2). a) Formulate a strategy game that models this situation in the case =1. Is this game the prisoner's dilemma? b) Find the range of values of for which the resulting game is the prisoner's dilemma. For the values of for which the game is not the prisoner's dilemma, find the Nash equilibria. 3) Find out all possible Nash equilibrium for the following game. Player 2 L U Player 1 D 4, 2 3, 3 1, 3/2 R 3, 1

4) Find out dominanted strategies for each player in the game and Nash equilibrium.( There are two player: 1 and 2. Player 1 has strategies- a,b,c,d. Player 2 has strategies w,x,y,z) w x y z a b c d e 7,5 5,0 6,0 2,6 1,6 -8,4 4,1 5,8 7,-10 2,-10 0,4 15,8.5 20,4 3,9 1,7 99,3 100,8 10,2 -10,8 8,6