ECON 233 – Introduction to Game Theory

Quiz 5

NAME:

ROLL NO.:

Date: 27th July 2017

Total Marks: 27
Time: 40 minutes

For the purposes of this quiz, we deal only in pure strategies.

1. Recall the traditional Battle of the Sexes being played by Bob and Alice. This time, Bob is unsure
whether about whether Alice likes his company or not (i.e. Alice’s type). There is an equal
chance that Alice’s type is like (L) or not (N). If Alice’s type is L then their payoffs are as below:

Alice

c m
Bob C 2,1 0,0
M 0,0 1,2

If Alice’s type is N then their payoffs are:

Alice
c M
Bob C 2,0 0,2
M 0,1 1,0

Alice obviously knows her own type!

a. Draw the extensive form of this game. (2 marks)

b. What is the strategy space for each player? (1 mark)
c. Find the Bayesian Nash Equilibrium. (4 marks)
 D 4,5
3,5 D S T
T C N

(q)
E 5,2
4,2 E
High (q)
(p)
D

Low (1 - p)
D 0,2
-1,2 D
T N (1 - q)
C

E 2,3
1,3 E
one of two types – High ability or Low ability. The student’s type is his private information. The t
acher has to decide the difficulty level of the exam he is about to set. Ideally, he would like to
et a difficult exam (D) for students of high ability, on the other hand, he does not want stude
ts of low ability to be unable to attempt the exam, so he would prefer to set an easy (E) exam
for them. The student can reveal his type to the teacher by coming to class (C) at a cer
ain cost, otherwise, he can choose not to come to class (
a. What does q in the diagram denote? Either give an expression for this value or explain
its meaning in detail. (2 marks)
b. How many information sets are there for each player? (1 mark)
c. The labels in the diagram below are not complete – add super-scripts in the diagram to
distinguish different actions. Use these new labels and state the strategy space for each
player. (2 marks)

d. Find the separating equilibria for this game, if any. (3 marks)

e. Find the pooling equilibria for this game, if any. (3 marks)
3. Recall the jury situation we discussed in class. This time, assume that there are 3 jurors. There is
1
a prior belief that the defendant is guilty with a probability .At the end of the trial, each juror
2
receives a signal G or I. The probability of receiving a signal G if the defendant is guilty is the
2
same as the probability of receiving a signal I when he is innocent and is .
3
Each juror can vote to convict (c) or acquit (a). A defendant is convicted only if all jurors vote
unanimously for conviction. If one or more jurors vote to acquit, he is acquitted. Voting is done
independently and without communication.
Each juror has the following identical payoffs based on the defendant’s guilt and outcome of the
case.

Convicted Acquitted
guilty 3 0
innocent -4 0

a. When does a juror, say juror 1, become Pivotal? Explain. (2 marks)

b. What is the significance of being Pivotal in deciding the juror’s best response? (1 mark)

Given that in this setup the probability of 2 G signals and one I when the defendant is guilty is

4
P (2G’s and 1 I |guilty) =
9
and the probability of the same signal when he is innocent is

2
P (2G’s and 1 I |innocent) =
9
Suppose a juror receives a signal I.

c. Find P (guilty | 2G’s and 1 I). (1 mark)

d. What is a single juror’s payoff from voting to acquit when he is pivotal and receives a signal
I? (1 mark)
e. What is a juror’s expected payoff from voting to convict when he is pivotal and receives a
signal I? (2 marks)
f. Is it a Nash Equilibrium for each juror to vote his signal? Explain. (2 marks)