Dominant and Dominated Strategies - What They Are and Why They're Important - Effectiviology

9/23/2019 Dominant and Dominated Strategies: What They Are and Why They’re Important – Effectiviology
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Dominant and Dominated Strategies: What

They Are and Why They’re Important
Strategic dominance is a state in game theory which occurs when one strategy that a
player can use leads to better outcomes for them than all the other possible
strategies that they can use, regardless of which strategies their opponents use.
https://effectiviology.com/strategic-dominance/ 1/18
Accordingly, a strategy is a dominant strategy if choosing it leads a player to better
outcomes than the other strategies that they can choose. Conversely, a strategy is
a dominated strategy if choosing it leads a player to worse outcomes than the other
strategies that they can choose.
In the following article, you will learn more about strategic dominance. You will
start by learning about dominant and dominated strategies, and about strategic
dominance in general. Then, you will see how accounting for strategic dominance
can help you make more strategic decisions, and how it can help you predict your
opponents’ behavior.
Table of contents 
1. Dominant strategies
1.1. What is a dominant strategy
1.2. What types of dominant strategies exist
1.3. Example of a dominant strategy
2. Dominated strategies
2.1. What is a dominated strategy
2.2. What types of dominated strategies exist
2.3. Example of a dominated strategy
3. Example of strategic dominance
4. Strategic dominance in single-player games
5. Not every game has strategic dominance
6. Using strategic dominance to pick your moves
7. Using strategic dominance to predict your opponents’ behavior
8. Nash equilibrium and strategic dominance
8.1. What is a Nash equilibrium
8.2. The connection between Nash equilibria and strategic dominance
8.3. Nash equilibria aren’t necessarily ef cient
8.4. Why Nash equilibria are important
9. Summary and conclusions
Dominant strategies
What is a dominant strategy
A dominant strategy is a strategy that is better than all the alternative strategies
that a player can pick, regardless of which moves their opponents make. This
means that, in a given game, a player’s dominant strategy is the best strategy that
they can choose from a strategic perspective, since it’s the one that will lead to the
greatest payoff for them.
What types of dominant strategies exist

There are two types of dominant strategies: strictly dominant strategies and weakly
dominant strategies:
A strategy is strictly dominant if choosing it always gives a better outcome than

choosing an alternative strategy, regardless of which moves other players make.
A strategy is weakly dominant if choosing it always gives an outcome that is as
good as or better than choosing an alternative strategy.
Example of a dominant strategy

Imagine a scenario where you are given two choices:
You can get $10 now.

You can ip a coin, and if the coin lands on heads, then you get $10, but if the coin
lands on tails, then you get nothing.
Clearly, the dominant strategy in this case is to take the $10 up front, since
choosing to ip the coin will get you a result that is either as good as or worse than
taking the money up front.
This example represents a very simple game, where it’s clear what the dominant
strategy is, just so we can clearly illustrate the concept of strategic dominance.
Later on, you will see examples of more complex situations, where dominant
strategies also play an important role.
Dominated strategies
What is a dominated strategy
A dominated strategy is a strategy that is worse than all the alternative strategies
that a player can pick, regardless of which moves their opponents make. This
means that, in a given game, a player’s dominated strategy is the worst strategy
that they can choose from a strategic perspective, since it’s the one that will lead to
the worst payoff for them.
What types of dominated strategies exist

There are two types of dominated strategies: strictly dominated strategies and
weakly dominated strategies:
A strategy is strictly dominated if choosing it always gives a worse outcome than

choosing an alternative strategy, regardless of which moves other players make.
A strategy is weakly dominated if choosing it always gives an outcome that is as
good as or worse than choosing an alternative strategy.
Example of a dominated strategy

Imagine the scenario that we saw earlier, where you can either get $10 now, or you
can ip a coin and if the coin lands on heads then you get $10, but if it lands on tails
then you get nothing.
Clearly, the dominated strategy in this case is to agree to the coin ip, since doing so
will give you an outcome that is either as good as or worse than taking the money
up front.
Once again, this is a highly simpli ed game, which is used to illustrate the concept
of strategic dominance in a clear manner. In the next section, you will see an
example of a dominated strategy in a more complex scenario.
Example of strategic dominance

Consider a situation where two companies, called Startupo and Megacorp, are
competing in a new market.
This market has one product which is sold in two different versions: the simple
consumer version and the complex professional version. Both versions of the
products are equally pro table for the company selling them. Most people in the
market (80%) are interested in the consumer version, and only a few (20%) are
interested in the professional version.
Each company can decide whether it wants to sell the consumer version or the
professional version of the product. If both companies decide to sell the same type
of product, then the two companies have to split the market for that product.
Otherwise, each company has the full consumer or professional market for itself.
As such, each company has two possible strategies to choose from, and there are
four possible outcomes to the scenario:
Both companies enter the consumer market. This means that the companies
split the consumer market (which accounts for 80% of the total market share),
and that each company therefore gets 40% of the total market share.
Both companies enter the professional market. This means that the companies
split the professional market (which accounts for 20% of the total market share),
and that each company therefore gets 10% of the total market share.
Startupo enters the consumer market, and Megacorp enters the professional
market. This means that Startupo gets the full consumer market (80% of the
total market share), and Megacorp gets the full professional market (20% of the
total market share).
Megacorp enters the consumer market, and Startupo enters the professional
market. This means that Megacorp gets the full consumer market (80% of the
total market share), and Startupo gets the full professional market (20% of the
total market share).
Based on this, if a company chooses to enter the consumer market, they know that
they will get either 40% or 80% of the total market share. Conversely, if a company
chooses to enter the professional market, they know that they will get either 10%
or 20% of the total market share.
Accordingly, for both companies, the dominant strategy in this scenario is to enter
the consumer market, since regardless of which move the other company makes,
they will end up getting a bigger portion of the market share this way.
Conversely, for both companies, the dominated strategy is to enter the professional
market, since regardless of which move the other company makes, they will end up
getting a smaller portion of the market share this way.
Note that this scenario can become more complex by adding more variables which
frequently appear in real life, such as additional players, additional products, and
different pro tability margins for different markets. However, though these
additional factors make the computations a bit more complex, the fundamental
idea behind dominant and dominated strategies remains exactly the same.

Strategic dominance in single-player games
In scenarios where there is only one player, there can still be dominant and
dominated strategies.
For example, consider a situation where you are walking along a street, and you
know that you need to cross the road. As you reach the rst of two possible (and
identical) crosswalks that you can use, the light turns red. You now have two
strategies to choose from:
Wait for the light at this crosswalk to turn green.

Keep going until you reach the next crosswalk, and then cross there.
Given that your goal is to minimize the amount of time spent waiting at the
crosswalk, the dominant strategy in this case is to keep going until you reach the
next sidewalk.
This is because, if you decide to cross at the current crosswalk, you’re going to have
to wait for the full length of time that it takes the light to turn green. Conversely, if
you keep going until you reach the next crosswalk, then once you get there, one of
three things will happen:
You will reach the second crosswalk just as the light turns red, in which case you
will have to wait the same length of time that you would have had to wait at the
rst crosswalk, which represents an outcome that is equal to the outcome that
you would have gotten if you chose to wait at the rst crosswalk.
You will reach the second crosswalk while the light is already red, in which case
you will have to wait for less time than you would have had to wait at the rst
crosswalk, which represents an outcome that is better than the outcome that you
would have gotten if you chose to wait at the rst crosswalk.
You will reach the second crosswalk while the light is green, in which case you
won’t have to wait at all, which also represents an outcome that is better than the
outcome that you would have gotten if you chose to wait at the rst crosswalk.
Since the strategy of going for the next crosswalk leads to an outcome that is equal
to or better than the outcome of waiting at the current crosswalk, it’s the (weakly)
dominant strategy in this case.
Note that, in this game, though there is only one player, the concept of “luck”, in the
form of whether or not the next light will be green or red, can be viewed as
representing a second player. However, the concept of strategic dominance can
occur in even simpler conditions, where there is no element of luck.
For example, consider a situation where you need to choose between buying one of
two identical products, with the only difference between the products being that
one costs $5, and the other costs $10. If your goal is to minimize the amount of
money you spend, then clearly buying the cheaper product is the dominant
strategy in this case.
Not every game has strategic dominance

There are situations where none of the possible strategies are dominant or
dominated.
A strategy that is neither dominant nor dominated is referred to as an intransitive

strategy, and a game with no strategic dominance is referred to as a non-transitive
game. This represents the fact that there is no transitivity, meaning that just
because strategy A is better than strategy B, and strategy B is better than strategy
C, that doesn’t mean that strategy A is better than strategy C.
For example, in the case of the game Rock, Paper, Scissors, each player can choose
one of three possible moves (i.e. rock, paper, or scissors). Each of these moves can
lead to a win, a loss, or a draw, with equal probability, depending on what move that
the other player makes:
Rock wins against scissors, loses against paper, and draws against rock.
Paper wins against rock, loses against scissors, and draws against paper.
Scissors wins against paper, loses against rock, and draws against scissors.
In this case, there is a preference loop with regards to which strategy leads to
which outcome, since each strategy is preferable, to an equal degree, in different
situations. Accordingly, none of the strategies is dominant over the other
strategies, and the game is said to have no strategic dominance.
Using strategic dominance to pick your moves

Accounting for strategic dominance can help you make better decisions.
In order to take strategic dominance into account, you should rst assess the
situation that you’re in, and take into account all the possible moves that you and
your opponents can make, as well as the outcomes of those moves, and the
favorability of each outcome.
Once you have mapped the full game tree, and ranked your outcomes in order of
favorability, you can move on to identify your dominant and dominated strategies,
using the criteria that we saw above. Then, if you have a dominant strategy, use it.
Otherwise, try to identify any dominated strategies that you have, and rule them
out.
For example, let’s say you have three possible strategies, called A, B, and C:
If strategy A is better than both strategy B and strategy C, that means that
strategy A is a dominant strategy, and that you should therefore use it.
If strategy A is equal to strategy B, but both are better than strategy C, that
means that strategy C is a dominated strategy, and that you should therefore
rule it out.
In more complex situations, you might choose to repeatedly rule out your
dominated strategies, in a process called iterated elimination of dominated strategies.
Eventually, doing this will leave you with either a single dominant strategy to use,
or with a number of equally-viable strategies that you can choose from.
If all these strategies lead to outcomes that are perfectly equal to one another, one
way to choose between them is to add a secondary variable, which will allow you to
enhance the way you rank the favorability of the different outcomes.
For example, let’s say you’re trying to decide which laptop to buy, out of ve
possible options. At rst, you might use price and reviews as the two most important
factors to consider, which will allow you to lter out most of the options, until you
end up with two possible alternatives to choose from, that are ranked equally
based on these criteria.
At this stage, you can add an additional variable, such as warranty, that wasn’t
important enough to take into consideration during the initial stages of your
decision, but which you can now take into account in order to choose between
these otherwise equal options.
In the rare situation where all strategies lead to outcomes that are truly equal, and
there is absolutely no way for you to discern which one is better, you can simply
pick one at random. In the case of games with multiple players, doing this has the
added advantage of helping you make moves that are dif cult for your opponents
to predict.
Using strategic dominance to predict your

opponents’ behavior
Understanding the concept of strategic dominance can help you predict your
opponents’ behavior, which can allow you to better prepare for the moves that
they will make. Speci cally, you should make two assumptions regarding how your
opponents will act:
You should assume that your opponents will use their dominant strategies.
You should assume that your opponents will avoid their dominated strategies.
However, there are a few possible exceptions to this. For example, there are
situations where other players might not pick a strategy that you think is dominant,
or might pick a strategy that you think is dominated, for any of the following
reasons:
They know something that you don’t.

They have different goals than you expect them to.
They’re acting irrationally, and not doing what’s best for them from a strategic
perspective.
As such, the better you can estimate your opponents’ knowledge and preferences,
and the more rational your opponents are, the more likely they are to act in a way
that you expect them to, when it comes to strategic dominance.
Furthermore, the more strongly a certain strategy is dominant over others, the
more con dent you can be that an opponent will use it, and the more strongly a
certain strategy is dominated by others, the more con dent you can be that an
opponent will avoid it.
Nash equilibrium and strategic dominance

The concept of the Nash equilibrium is one that is often mentioned in conjunction
with strategic dominance. Though it’s not crucial to understand what a Nash
equilibrium is in order to understand what dominant and dominated strategies are,
this concept can still be interesting to learn about, and it has some useful practical
applications, that relate to strategic dominance.
What is a Nash equilibrium

A Nash equilibrium is a situation in a game with multiple players, where no player
stands to gain anything by changing their own strategy while other players keep
their strategies unchanged.
For example, in the example we saw earlier, where two companies can choose
whether to enter the consumer market (80% of the total market share) or the
professional market (20% of the total market share), the Nash equilibrium is the
situation where each of the companies gets a 40% share of the total market by
investing in the consumer version of the product, since neither of them will be able
to increase their market share by switching to the professional market.
There can be more than one possible Nash equilibrium in a given game, and Nash
equilibria are generally self-enforcing, since once players reach them, they have no
incentive to change their strategy.
The connection between Nash equilibria and strategic

dominance
There are several important connections between strategic dominance and Nash
equilibria.
First, if a player has a strictly dominant strategy, then that player is going to use that
strategy in each of the possible Nash equilibria in the game, since that’s the best
strategy that the player can pick.
Furthermore, if each player in the game has a strictly dominant strategy, then there
is only one unique Nash equilibrium in the game, since all players are simply going
to pick their strictly dominant strategy when deciding how to act.
In addition, if a player has a strictly dominated strategy, they cannot use it as part of
a Nash equilibrium, since they will always pro t by using a different strategy.
However, if a player has a weakly dominated, that strategy can sometimes be a part
of a Nash equilibrium. For example, in a situation where two players must agree to
something in order to get the best outcome, a state where both players disagree
can be a Nash equilibrium, since neither player bene ts from switching their
strategy (from ‘disagree’ to ‘agree’), unless the other player does the same, despite
the fact that both of them will bene t from making the switch (i.e. from agreeing
with each other).
Nash equilibria aren’t necessarily ef cient

Though a Nash equilibrium is a situation where no player can bene t from
unilaterally changing their strategy, that doesn’t mean that a Nash equilibrium
represents the ideal solution to a game.
A famous example which illustrates this concept is that of the prisoner’s dilemma,
where two prisoners, who have no way of communicating with each other, have
two options: they can either betray the other prisoner, or they can stay silent.
There are three types of possible outcomes to this game:
If both prisoners betray each other, they each get 2 years in prison.
If both prisoners stay silent, they each get 1 year in prison.
If one prisoner betrays the other, and the other stays silent, the one who
betrayed gets to go free, while the one who was betrayed gets 3 years in prison.
For both prisoners, the weakly dominant strategy is to betray the other prisoner:
If the rst prisoner stays silent, it’s better for the second prisoner to betray
them, since this means that the second prisoner gets to go free instead of
spending a year in prison.
If the rst prisoner betrays the second one, it’s better for the second prisoner to
betray the rst one in return, since this means that the second prisoner will get
only 2 years in prison, instead of 3.
Here, there is a Nash equilibrium in the state where both players select their
weakly dominant strategy of betraying the other person, which ends up causing
them both to spend 2 years in prison.
In theory, both players could bene t more from choosing to stay silent, which will
allow them to spend only 1 year in prison, instead of 2. However, since there is no
way for each player to guarantee the honesty of the other player, neither of them
will be willing to switch to the ‘stay silent’ strategy, since if they do this alone, they
will end up spending 3 years in prison (instead of 2), while the other person will get
to walk away free.
Note: a related concept to the one illustrated here is that of Pareto ef ciency
(sometimes referred to as Pareto optimality), which is a state where any changes in
strategy will make things worse for at least one player.
Why Nash equilibria are important

Nash equilibria should be taken into account when thinking about dominant and
dominated strategies, because they can help you predict how people will act, and
because they can help you identify situations in which players can reach mutual
agreements.
As such, if you are doing a strategic analysis of a certain game, try to identify any
possible Nash equilibria, and take them into account when predicting how people
will act, and when deciding how to act yourself.
Summary and conclusions

Strategic dominance is a state in game theory which occurs when one strategy
that a player can use leads to better outcomes for them than all the other
strategies that they can use, regardless of which moves their opponents make.
A strategy is dominant if choosing it leads to better outcomes than other possible
strategies, and dominated if choosing it leads to worse outcomes than other
possible strategies.
If you have a choice between receiving $10 now or tossing a coin and receiving
$10 if it lands on heads but nothing if it lands on tails, getting the money upfront
is the dominant strategy while ipping the coin is the dominated strategy, since
taking the money upfront leads to an outcome that is as good as or better than
ipping the coin.
When deciding which strategies to use, you should strive to use your dominant
strategy and to avoid your dominated strategies, and if necessary, you can
iteratively eliminate any dominated strategies that you have, or introduce new
criteria in order to choose between several dominant strategies.
You can predict your opponents’ moves by generally assuming that they will use
their dominant strategies and avoid their dominated strategies, though there
some exceptions to this, such as situations where your opponent is acting in an
irrational manner, or has different goals that you expect them to.
If you found this article interesting and you want to learn more about game theory,
take a look at “The Art of Strategy: A Game Theorist’s Guide to Success in Business
and Life“. It’s a good read for someone looking to understand basic game theory
and how it applies to real-life situations.
Other articles you may nd interesting:

Look Forward, Reason Backward: A Primary Principle of Strategic Thinking
The Strategic Advantage of Being a Small Fish
Precommitment: Burning Bridges as a Strategic Decision
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9/23/2019 Dominant and Dominated Strategies: What They Are and Why They’re Important – Effectiviology

Dominant and Dominated Strategies: What

What types of dominant strategies exist

A strategy is strictly dominant if choosing it always gives a better outcome than

Example of a dominant strategy

You can get $10 now.

What types of dominated strategies exist

A strategy is strictly dominated if choosing it always gives a worse outcome than

Example of a dominated strategy

Example of strategic dominance

Wait for the light at this crosswalk to turn green.

Not every game has strategic dominance

A strategy that is neither dominant nor dominated is referred to as an intransitive

Using strategic dominance to pick your moves

Using strategic dominance to predict your

They know something that you don’t.

Nash equilibrium and strategic dominance

What is a Nash equilibrium

The connection between Nash equilibria and strategic

Nash equilibria aren’t necessarily ef cient

Why Nash equilibria are important

Summary and conclusions

Other articles you may nd interesting:

Cui Bono: Why You Should Ask “Who Bene ts?”

The Availability Cascade: How Information Spreads on a Large Scale

Cherry Picking: When People Ignore Evidence that They Dislike

UPGRADE YOUR KNOWLEDGE

Enter your email

Enter your email

About | Contact | Privacy | Terms | © 2019 Effectiviology

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