Game Theory … Contd.

Nicholson and Snyder Chapter 8

• Let us look at another well-known game called “the battle of
the sexes”.
• A Husband (H) and Wife (W) are planning to go to the Ballet
or Boxing match. They would rather be together than be
apart.
Ballet (2 , 1) The husband and
wife move
H simultaneously.
Ballet (0 , 0)
Boxing The husband
W (0 , 0)
does not know
Ballet what the wife’s
Boxing H moves are.
Boxing (1 , 2)
• We can present the information of the extensive form game in
a payoff matrix and search for NE by underlining best
responses.
H
Ballet Boxing
W Ballet 2,1 0, 0
Boxing 0, 0 1, 2

• When we do so, we find out that there are actually two NE. This
is an example of a game with more than one NE. There are no
dominant strategies.
• Q: Which strategy would be chosen? Hard to say, as the
outcomes are symmetric.
• Let’s look at another game: “Rock, Paper, Scissors”.
• In this game: Scissors > Paper; Paper > Rock and Rock >
Scissors. We can put all of the information in a payoff matrix
as follows.

P2 When we try to find NE by

Rock Paper Scissors underlining best responses we
note that we fail to underline
Rock 0,0 -1 , 1 1, -1
both entries in any cell. This
P1 Paper 1, -1 0,0 -1, 1 means that, for this game,
Scissors -1, 1 1, -1 0, 0 there are no NE strategies.
• Let’s look at another game, the payoff matrix of which is given
below.
• Let us begin by searching for a NE by underlining best
responses. When we do so we find that (U,L) with payoff (3,0)
is a NE.
P2
L M R
U 3,0 0 , -5 0, -4
P1 C 1, -1 3,3 -2, 4
D 2, 4 4, 1 -1, 8
• There is another way of finding NE.
• Consider P1 first. Notice, that for P1, the payoffs of D strictly
dominate the payoffs of C (2>1, 4>3 and -1>-2), so P1 will
never play C. We can get rid of C for P1.

P2 P2
When we get rid
L M R of C we have the L M R
U 3,0 0 , -5 0, -4 payoff matrix to P1 U 3,0 0, -5 0,-4
the right → D 2,4 4,1 -1,8
P1 C 1, -1 3,3 -2, 4
• Now Dnotice
2, 4 that
4, 1 in -1,
the8 reduced matrix, for P2, the payoffs of R
strictly dominate the payoffs of M and the payoffs of L strictly
dominate the payoffs of M as well. We can get rid of M for P2.
• After removing M we get the following matrix:
P2
L R
P1 U 3, 0 0, -4
D 2, 4 -1, 8

• Notice that for P1, the payoffs of U strictly dominate the

payoffs of D (3>2 and 0>-1). We can get rid of D for P1 and end
up with
P2
L R
P1 U 3, 0 0, -4

• And since, for P2, the payoff of L (0) is greater than the payoff
of R (-4) we can eliminate R for P2 and end up with strategy
set (U,L) with payoffs (3,0) which is just the NE we figured out
earlier.
• The method that has just been outlined is
called “iterated elimination of dominated
strategies” and is sometimes useful in finding
NE, especially if the payoff matrix is large.
• You should repeat the process beginning with
P2. You should end up with the same result.