Table 10-1 (textbook)

A Simultaneous Move, One shot Game

A Normal Form Game

Player B
Strategy Left Right
Player A
Up 10, 20 15,8
Down -10, 7 10,10

The numbers in the table represent the return for the players based on the choices they make.
 If player A chooses Up and player B chooses Left, then Player A gets a return of 10 and
Player B gets a return of 20
 If player A chooses up and player B chooses Right, then player A gets a return of 15 and
player B gets a return of 8
 If player A chooses down and player B chooses Left then Player A gets a return of -10
and player B gets a return of 7
 If player A chooses Down and player B chooses Right then Player A gets a return of 10,
and player B gets a return of 10.
Player A’s strategies are Up and Down
Player B’s strategies are Left and Right.
What strategies will they choose? One player’s choice depends on the other player’s choice.
Neither player knows what choice the other player will make, though both have the information
in the table available to them.
If Player B chooses “Left” then Player A will choose “Up” (return of 10) instead of “Down”
(return of -10)
If Player B chooses “Right” then player A will choose “Up” (return of 15) instead of “Down”
(return of 10)
Dominant strategy. If one player will make the same choice no matter what the other player
chooses to do, then the first player’s choice is their dominant strategy.
Therefore, even though Player A does not know what choice player B will make, player A will
choose “Up” no matter what player B chooses. This means that Player A’s dominant strategy is
“Up”.
If Player A chooses “Up” then Player B will choose “Left” (return of 20) instead of Right (return
of 8)
If Player A chooses “Down” then player B will choose “Right” (return of 10) instead of Left
(return of 7)
Therefore, Player B does not know what choice player A will make, player B will NOT choose
the same strategy no matter what player A will do. This means that Player B does not have a
dominant strategy.
Nash Equilibrium: An outcome will be a Nash equilibrium if, given the other player’s strategy
no player can unilaterally improve their own outcome by changing their strategy.
The above table has four different outcomes
1. (Up, Left) returns are (10, 20). Given B’s strategy of left, can A do better than Up. Given
B’s strategy of Left, if A choose Down then he will get a return of -10 instead of 10 and
A cannot do better than (Up, Left) given B’s strategy of Left.
Given A’s strategy of Up, can B do better than Left. Given A’s strategy of UP, if B
chooses Right he will get a return of 8 instead of 15, and B cannot do better than (Up,
Left) given A’s strategy of Up.
Since neither player can do better than (Up, Left) given the other player’s strategy,
(Up, Left) is a Nash equilibrium.

2. (Up, Right) returns are (15, 8).

Given B’s strategy of Right can A do better than Up? Given B’s strategy of Right, if A
choose Down then he will get a return of 10 instead of 15 and A cannot do better than
(Up, Left) given B’s strategy of Left.

Given A’s strategy of Up, can B do better than Right? Given A’s strategy of Up, if B
chooses Left he will get a return of 20 instead of 8, and B can do better than (Up,
Right) given A’s strategy of Up.

Since B can do better than (Up, Right) given A’s strategy, (Up, Right) is NOT a Nash
equilibrium.

3. (Down, Left) returns are (-10, 7).

Given B’s strategy of Left can A do better than Down? Given B’s strategy of Left, if A
choose Up then he will get a return of 10 instead of -10 and A can do better than
(Down, Left) given B’s strategy of Left.

Given A’s strategy of Down, can B do better than Left? Given A’s strategy of Down, if B
chooses Right he will get a return of 10 instead of 7, and B can do better than (Down,
Left) given A’s strategy of Down.

Since both A and B can do better than (Down, Left) given the other player’s strategy,
(Down, Left) is NOT a Nash equilibrium.
 4. (Down, Right) returns are (10, 10).

Given B’s strategy of Right can A do better than Down? Given B’s strategy of Right, if A
choose Up then he will get a return of 15 instead of 10 and A can do better than (Down,
Right) given B’s strategy of Right.

Given A’s strategy of Down, can B do better than Right? Given A’s strategy of Down, if
B chooses Left he will get a return of 7 instead of 10, and B cannot do better than
(Down, Right) given A’s strategy of Down.

Since A can do better than (Down, Right) given B’s strategy, (Down, Right) is NOT a
Nash equilibrium.

Player B
Strategy Left Right
Player A Up 10, 20 15,8
Down -10, 7 10,10

Secure Strategy: A strategy that guarantees the highest payoff given the work possible scenario.
A player will chose a strategy that will allow them to avoid the worst possible outcome.
In the above table, Player A’s worst possible outcome is -10. A strategy of “Up” will allow
player A to avoid getting a return of -10. Therefore, Player A’s secure strategy is Up.
In the above table, Player B’s worst possible outcome is 7. A strategy of “Right” will allow
player B to avoid a return of &. Therefore, player B’s secure strategy is Right.