Section#1

Question#1: Imagine a kicker and a goalie who confront each other in a

penalty kick that will determine the outcome of the game. The kicker
can kick the ball left or right, while the goalie can choose to jump left or
right. Because of the speed of the kick, the decisions need to be made
simultaneously. If the goalie jumps in the same direction as the kick,
then the goalie wins and earns 1 point and the kicker loses 1 point. If
the goalie jumps in the opposite direction of the kick then the kicker
wins and earns 1 point and the goalie loses 1 point.
Model this as a normal form game and write down the matrix that
represents the game you modeled.
Solution:
1. The players are two players, 1 (kicker) and 2 (goalie), I = {1, 2}.
2. Their feasible actions are to left (L) or not to right (R). Thus the strategies are S1
= S2 = {L, R}.
3. The payoffs (profits): 1 denote a win and −1 denote a loss

Question#2: Two firms operate in a market. Presently, each one

of them earns $45 million from its customers. Now both have
to decide whether to invest (I) all the money in R&D or not (N).
However, R&D is successful only if both firms invest. If R&D is
successful the net profit for each firm is $50 million. Model this
problem as a normal form game and write down the matrix
that represents the game.
Solution:
1. The players are the firms, I = {1, 2}.
2. Their feasible actions are to invest (I) or not to invest (N). Thus the strategies
are S1 = S2 = {I, N}.
3. The payoffs (profits) may be represented by the following table.

Question#3: Tolbert, Gus and Yelnic are considering going to the bar. Each wants
to go if only one other person goes they will take payoff 2 else if one goes and no
one else goes, the one at the bar will feel silly and take payoff 0 , but if all three
go it will be overcrowded they will take payoff -1.
Solution:
Question#4: given the following matrix solution:
Player2 L R

U 5,1 6,1

Player1 M 6,4 5,0

D 6,4 3,4

a- Define the set of players, strategy space of each agent, strategy space of
the game, 𝑎𝑛𝑑 payoff for each strategy profile.
b- Is there any weekly dominated strategy?

Sol:
a- I = {1,2}
S1 = {U, M, D}, S2 = {L, R}
S = {(U, L), (U, R), (M, L), (M, R), (D,L), (D,R)}
π(U, L) = (5,1), π(U, R) = (6, 1), π(M, L) = (6,4), π(M, R) = (5,0), π(D, L) = (6,4),
π(D,R) = (3,4)

b- For player 1 ➔strategy M weekly dominate strategy D

L R
U 5,1 6,1
M 6,4 5,0

For player 2 ➔ strategy L weekly dominate strategy R

L
U 5,1
M 6,4
For player 1 ➔ strategy M dominate strategy U

The solution is Strategy {M,L}

Question#5: P2
X Y Z

U 5,1 0,4 1,0

P1 M 3,1 0,0 1,5

D 4,3 4,4.5 2,5

a- Define 𝐼, 𝑆𝑖 for each player 𝑖, 𝑆, 𝑎𝑛𝑑 𝜋 for each strategy profile.

b- Is there any Strictly dominated strategy?
Sol:
a- I = {P1, P2}
S1 = {U, M, D}, S2 = {X, Y, Z}
S = {(U, X), (U, Y), (U, Z), (M, X), (M, Y), (M, Z), (D,X), (D,Y), (D,Z)}
π(U, X) = (5,1), π(U, Y) = (0,4), π(U, Z) = (1,0), π(M, X) = (3,1), π(M, Y) = (0,0),
π(M, Z) = (1,5), π(D, X) = (4,3), π(D, Y) = (4,4.5), π(D, Z) = (2,5)

b- For player 1 ➔ strategy D strictly dominate M

X Y Z

U 5,1 0,4 1,0

D 4,3 4,4.5 2,5
 For player 2 ➔ strategy Y strictly dominate X
Y Z

U 0,4 1,0
D 4,4.5 2,5

For player 1 ➔ Strategy D strictly dominate U

Y Z

D 4,4.5 2,5

For player 2 ➔ Strategy Z strictly dominate Y

Z

D 2,5
The solution is Strategy {D,Z}