Recitations:Rationalizability MSNE

Defn /strictly Dominated Strategies)

A
pure strategy si is strictly dominated if a strategy
or ASisuch thatui(Si, s-i > Mi(Si,s -i) V
mixed) sie
pure
strategy profiles S-it AS-i

Def (BestResponse)

suppose ihas a belief fit AS.:aboutthe strategies played by

other players. I's strategy sitsi is a bestresponse if hi(si, E.i)
hi(Si", 8.i) VSieSi

Defn (Rationalizable Strategy)

A strategy thatsurvives iterated dominance is rationalizable.
Example (HW3, #1) RBC

↑- x E
-

di, ofcocoa, a me >

"N
Round 1:For MBC, Estrictly dominates 2: delete
L*
Round 2:EUCBC(E):(24, 16), EUCBC(L):(30,12)
EURBC(E):(14,8) < EMRBC(L):(30,1)
E(*)
Delete

Rationalizable Strategies:GL, E, Eyc 7 97,6,64

=
 Si.( 10,100],goalscloser to 70% the average
of of
players.
Other 35
A. Constructthe bestresponse function player
of i (as afunction of
a -
i)
70 i)
=

max Si 100
=
-
(si -
-

[si]: -2/si E.1) 0 -

=

=1si* BR(- 1)
=

Ei =
-

B. Findthe set of
dominated
strategies
[BR(a-i)]
Since 10, 100],
(it max
1(a-1) 5. 2500
=
=

:BRilai) [0,70] <

Given this, we know thatsite[0,7 thatis BR

C. Use iterated dominanceto calculate rationalizable strategies

Round 2:Sic[0,70]
(BR(9 i)] 7.7(35)
max - = 49
=

:BRi(ai) t [0,49]
-> Pattern:BRi(ai) t [0,Z"*.100]
:As 138, interval compresses [0,0]
to ->
90,0,....0]
Defn (Pure Strategy NE)
profile sie Siis a PSNE EFT sitBRi(s-i) for each i
strategy
A

(Si,5-i)>/ Ui(Si)S i) VsieS; and ti

Ui
Defu (Mixed Strategy NE)

(0,52, On), GieASi

A strategy profile 0
=
... is a MSNE
Fi
<IT Uil0i,8i)>sUi(Si',0i) USieS;and
JOiis BR to E. Vplayer i)
Proposition:Letsitcsidenote the set of pure strategies thatplayer
in mixed strategy profile o=(0,... on)
iplays with positive probability

O is a NE C7
=

=
n,

iii)so:nisiOSVsi siCSi,Si
Pf (By Contradiction).
If iand isdoes nothold, then sie sit and sit Si
S.t. Ui(Si, 0.i) (ui(Si, 0..). Ifso, player Ican strictly
increase payoff by playing si. (necessity

If iand ishold but O is nota NE, then there 7 a player;

w/ a strategy OP with Ui (0i,0-2) > Ui(0iso.i).
But if so, a pure strategy Sic played with positive
under offor wich Uilsi", 0i)
probability > Ui(ois (i)
=>
E Sit/sufficiency)
since Uil0i,0.i) Ui(SicO) Vsit =
. .A necessary and sufficient condition for MSNE.

Each player, given the distribution strategies played by his opponents,

of

is indifferentbetween all pure strategies player iplays we positive

probability and thatthese strategies are atleast as

good as
any pure strategy he plays w/ positive probability

Conokony:A pure strategy profile (Sic... (n) is a NEC =

Y itis

a
degenerate MSNE-> how we solve nto's where randomization is

not
permitted.