Problem Set 1

1. Give examples of two player games that have

(i) a unique NE which is not a WDSE.
(ii) a unique WDSE which is not an SDSE.
(iii) a unique DSE and another profile which is only an NE.
2. Consider the following variant of prisoners’ dilemma problem. Find the
H H P2
H NC C
P1 HH
NC -2, -2 -4, -x
C -x, -4 -x, -x

values of x for which:

(i) (C, C) is an SDSE.
(ii) (C, C) is a WDSE but not an SDSE.
(iii) (C, C) is an NE but not a WDSE.
(iv) (C, C) is not even an NE.
3. There are n departments in IITK. Each department can try to convince the
Director to get a certain budget. If hi is the number of hours of work put
in by a department to make the proposal, they suffer a cost of ci = wi h2i ,
where wi is a constant. When the effort levels of the departments are
(h1 , h2 , . . . , hn ), the total budget that gets allocated to all the departments
is given by:
Xn
α hi + β Πni=1 hi
i=1

where α and β are constants. The total amount is equally split between
the departments. Consider a game where the departments simultaneously
and independently decide how many hours to spend on this effort. Show
that a strictly dominant strategy equilibrium exists iff β = 0. Compute
this equilibrium.
4. Compute NE for two player game with S1 = {1, 2}, S2 = {3, 4}, and

u1 (x, y) = −u2 (x, y) = | x − y | ∀(x, y) ∈ {1, 2} × {3, 4}.

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 5. Let S1 = S2 = · · · = Sn = {1, 2, . . . , n}, and
(
aik > 0 if s1 = · · · = sn = k
ui (s1 , . . . , sn ) =
0 otherwise.

Show that the only pure strategy profiles which are not equilibrium points
are those with exactly (n − 1) of the si equal.
6. Find all NE’s of the following game.
HH P2
HH A B C D
P1 H
A 5, 2 2, 6 1, 4 0, 4
B 0, 0 3, 2 2, 1 1, 1
C 7, 0 2, 2 1, 5 5, 1
D 9, 5 1, 3 0,2 4, 8

7. Find all NE’s of the following 3-player game. Note that S1 = {x1 , y1 },
S2 = {x2 , y2 }, and S3 = {x3 , y3 }.

S2 and S3
S1 x3 y3
x2 y2 x2 y2
x1 0, 0, 0 6, 5, 4 4, 6, 5 0, 0, 0
y1 5, 4, 6 0, 0, 0 0, 0, 0 0, 0, 0

8. Consider n players simultaneously announce an integer between 0 and

100. A prize of $100 is split equally between all players whose number is
closest to 2/3 of the average. Other players get nothing. Find the NE of
this game.
9. Two players have two options for investing their money of Rs. 1000.
Investing in bonds (B) gives the player a profit of 10%, or investing it in
a risky venture (V) which if successful gives a profit of 20% and on failure
a profit of 0%. The venture is successful if and only if total investment
is at least Rs. 2000. The players make the investment decision without
knowing the decisions of each other. Find all the Nash equilibria of this
game.
10. Each of n people choose whether or not to contribute a fixed amount
toward the provision of a public good. The good is provided if and only
if at least k people contribute, where 2 ≤ k ≤ n; if it is not provided,
contributions are not refunded. Each person ranks outcomes from best to
worst as follows: (i) any outcome in which the good is provided and he

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 does not contribute, (ii) any outcome in which the good is provided and
he contributes, (iii) any outcome in which the good is not provided and he
does not contribute, (iv) any outcome in which the good is not provided
and he contributes. Formulate this situation as a strategic game and find
its Nash equilibria.
11. Two players simultaneously report a number in the interval [0, 10]. They
divide $10 between them as follows. If the sum of their reported numbers
is at most 10, they just take the split and the remaining money is burnt.
If their sum is greater than 10, the smaller bidder gets the money he asked
for, and the remaining money is given to the larger bidder. If their sum is
greater than 10 and they bid equally, then they get $5 each. Find all the
Nash equilibria of this game.

Answers
1. The examples for (i) and (ii) can be obtained from the answer for Q2. A
possible example for (iii) is given below. The profile (A,A) is a WDSE,
and (B,B) is an NE.
H H P2
H A B
P1 HH
A 2, 2 5, 1
B 1, 5 5, 5

2. (i) x < 2, (ii) x = 2, (iii) 2 < x ≤ 4, (iv) x > 4.

3. (Idea of Proof) Show that the best response function for a player is de-
pendent on the strategy of other players whn β ̸= 0, and is independent
when β = 0.
4. A unique Nash equilibrium (1, 3).
6. A unique Nash equilibrium (B, B).
7. Four Nash equilibria: (y1 , x2 , x3 ), (x1 , y2 , x3 ), (x1 , x2 , y3 ), and (y1 , y2 , y3 ).
8. A unique Nash equilibrium (0, 0, . . . , 0) when n = 2 or n = 3. Two Nash
equilibria when n ≥ 4: (0, 0, . . . , 0) and (1, 1, . . . , 1).
9. Two Nash equilibria: (B, B) and (V, V ).
10. The following are the Nash equilibria: (i) No player

contributing; (ii) Any
k out of n players contributing. A total of 1 + nk Nash equilibria.
11. A unique Nash equilibrium (5, 5).