Game Theory

Lecture 9

Leong Kaiwen

Assistant Professor in Economics

Nanyang Technological University

2021

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Mixed Strategy

Formal definition of mixed strategy: a mixed strategy pi is a randomi-

sation over i’s pure strategies. pi (si ) is the probability that pi assigns
1 1 1
to the pure strategy si , eg., pi =( , , ) in rock paper scissors (RPS)
3 3 3
game.
Note:
1 1
pi (si ) could be 0. So in RPS pi =( , ,0), pi (s)=0
2 2
pi (si ) could be 1, eg., pure strategy.

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Mixed Strategy

Payoffs from mixed strategy

The expected payoff of the mixed strategy of the mixed strategy pi is the
weighted average of the expected payoffs of each of the pure strategies
in the mix.
Example
Player 2
a b
A (2,1) (0,0)
Player 1
B (0,0) (1,2)
1 4 1 1
Suppose p1 =( , ), p2 =( , ). What is the expected payoff of p1 ?
5 5 2 2

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Mixed Strategy

First, we calculate the payoffs of the pure strategies involving p.

1 1
EU1 (A, p2 ) = [2] + [0] = 1
2 2
1 1 1
EU1 (B, p2 ) = [0] + [1] =
2 2 2
1 4 3
Now we calculate EU1 (p1 , p2 ) = EU1 (A, p2 ) + EU1 (B, p2 ) =
5 5 5
3
Notice: The number I ended up with must lie between the payoff I
5
would have got from A (which is 1) and the payoff I would have got
1
from B (which is ).
2

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Mixed Strategy

Key: In general, when I play a mixed strategy, the expected payoff I

get is the weighted average of the expected payoffs of each of the pure
strategies in the mix. And the weighted average payoff always lie inside
the payoffs involved in the mix.
⇓
Lesson: If a mixed strategy is a BR, then each of the pure strategies
in the mix must themselves be BR. In particular, each must yield the
same expected payoff, eg., construct the highest GPA.

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Mixed Strategy

Definition: A mixed strategy profile (p1∗ , p2∗ ,..., pN∗ ) is a mixed strategy
NE if for each player i, that player i’s mixed strategy pi∗ is a BR to p−i ∗ .

Note: when we defined NE using pure strategy, the definition of NE for

mixed strategy is changed. Everyone we used p, we had an s instead.
Other than this, both definitions are the same.
Lesson: If pi∗ of a particular strategy is positive (I am using this strategy
in my mix), then that strategy is also a BR to what everyone else is
doing.
⇓
This lesson is going to help us find mixed strategy NE.

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Tennis Game

Venus and Serena Williams

S
l r
L (50,50) (80,20)
V
R (90,10) (20,80)
Claim: No pure strategy NE in this game.
Check
If S believes V will choose L, S’s BR is l.
If S believes V will choose R, S’s BR is r.
If V believes S will choose l, V’s BR is R.
If V believes S will choose r, V’s BR is L.

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Tennis Game

Find a mixed strategy

Interpretation: A mixed strategy NE in this game is going to be a mix
of V between L & R, and a mix for S between l & r, such that each
person’s mix, each person’s randomisation is a BR to the other person’s
randomisation.
If players are playing a mixed strategy as part of a NE, each of the pure
strategies involved in the mix, each of their pure strategies must itself
be a BR.

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Tennis Game

Establish some notation

S
l r
L (50,50) (80,20) p
V
R (90,10) (20,80) 1-p
q 1-q
Trick: To find S’s NE mix (q,1-q), look at V’s payoff.
V’s payoffs against q:
If V chooses L, payoff=50q+80(1-q)
If V chooses R, payoff=90q+20(1-q)

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Tennis Game

If Venus is mixing in NE, it must be the case that choosing L or R are

themselves best responses. If one of them wasn’t, V should drop them
out of the mix and raise V’s average payoff.
⇒ Payoff to L for V=Payoff to R for V
⇒ 50q+80(1-q)=90q+20(1-q)
q=0.6
This 0.6 is S’s mix
To find out how V is mixing, we will use S’s payoffs.
S’s payoff if S chooses l=50p+10(1-p)
S’s payoff if S chooses r=20p+80(1-p)

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Tennis Game

Since S is mixing in NE, payoffs of l & r must be equal.

⇒ 50p+10(1-p)=20p+80(1-p)
⇒ p=0.7
This is V’s mix
Hence mixed NE=[(0.7,0.3),(0.6,0.4)]

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Tennis Game

Now S hires a new coach and improves S’s payoff to playing l. The
rest of the game remains unchanged.
S
l r
L (30,70) (80,20)
V
R (90,10) (20,80)
There is still no pure strategy NE.
There are 2 effects after we change the game.
Direct effect: How S should play the game. Since S has improved her
payoff if she chooses l so S should choose l more often than before. This
means q ↑.
Strategic effect: Since S’s payoff of l has increased and hence V’s payoff
is lower, V is less likely to choose L. So S will not choose l so often. This
means q↓.

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Tennis Game

Which of these effects will win out?

To find the new q for S, use V’s payoffs.
Payoff for V choosing L=30q+(1-q)80
Payoff for V choosing R=90q+(1-q)20
Payoffs are equal
⇒ 30q+(1-q)80=90a+20(1-q)
⇒ q=0.5
q used to be 0.6 in the original game. Now it’s fallen to 0.5 in the new
game, q went down.
The strategic effect (indirect effect) is bigger.

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Tennis Game

Similarly, we know
payoff for S playing l=payoff for S playing r
70p+(1-p)10=20p+80(1-p)
p=7/12 <7/10
This is known as a comparative statics exercise. We looked at a game,
we found an equilibrium. We changed something fundamental about
the game and we looked again at the new equilibrium. That is called
comparative statics.

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