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Normal Form Games
Julio Davila
2009
Julio Davila Normal Form Games
![Page 2: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/2.jpg)
Normal form games...
1 I : a set of players
2 for all i ∈ I ,Si : the sets of actions available to each player
Σi : the set of probability distributions over Si
3 for all i ∈ I , ui ∈ R×j∈I Σi linear in each σj ∈ Σj , for all j ∈ I ,i.e. the payoffs for each player of each profile ofrandomizations over actions.
A normal form game is a collection {Si , ui}i∈I as above
Julio Davila Normal Form Games
![Page 3: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/3.jpg)
Normal form games...
1 I : a set of players
2 for all i ∈ I ,Si : the sets of actions available to each player
Σi : the set of probability distributions over Si
3 for all i ∈ I , ui ∈ R×j∈I Σi linear in each σj ∈ Σj , for all j ∈ I ,i.e. the payoffs for each player of each profile ofrandomizations over actions.
A normal form game is a collection {Si , ui}i∈I as above
Julio Davila Normal Form Games
![Page 4: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/4.jpg)
Normal form games...
1 I : a set of players
2 for all i ∈ I ,Si : the sets of actions available to each player
Σi : the set of probability distributions over Si
3 for all i ∈ I , ui ∈ R×j∈I Σi linear in each σj ∈ Σj , for all j ∈ I ,i.e. the payoffs for each player of each profile ofrandomizations over actions.
A normal form game is a collection {Si , ui}i∈I as above
Julio Davila Normal Form Games
![Page 5: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/5.jpg)
Normal form games...
1 I : a set of players
2 for all i ∈ I ,Si : the sets of actions available to each player
Σi : the set of probability distributions over Si
3 for all i ∈ I , ui ∈ R×j∈I Σi linear in each σj ∈ Σj , for all j ∈ I ,i.e. the payoffs for each player of each profile ofrandomizations over actions.
A normal form game is a collection {Si , ui}i∈I as above
Julio Davila Normal Form Games
![Page 6: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/6.jpg)
Normal form games...
1 I : a set of players
2 for all i ∈ I ,Si : the sets of actions available to each player
Σi : the set of probability distributions over Si
3 for all i ∈ I , ui ∈ R×j∈I Σi linear in each σj ∈ Σj , for all j ∈ I ,i.e. the payoffs for each player of each profile ofrandomizations over actions.
A normal form game is a collection {Si , ui}i∈I as above
Julio Davila Normal Form Games
![Page 7: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/7.jpg)
Normal form games...
• utilities are linear in each σi ∈ Σi ,
• for finite Si ’s
ui (σ) =∑
s∈×i′∈I Si′
(∏j∈I
σj(sj))vi (s)
for some vi ∈ R×i∈I Si
• σi (si ) is the probability of i playing si according to σi .
Julio Davila Normal Form Games
![Page 8: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/8.jpg)
Normal form games...
• utilities are linear in each σi ∈ Σi ,
• for finite Si ’s
ui (σ) =∑
s∈×i′∈I Si′
(∏j∈I
σj(sj))vi (s)
for some vi ∈ R×i∈I Si
• σi (si ) is the probability of i playing si according to σi .
Julio Davila Normal Form Games
![Page 9: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/9.jpg)
Normal form games...
• utilities are linear in each σi ∈ Σi ,
• for finite Si ’s
ui (σ) =∑
s∈×i′∈I Si′
(∏j∈I
σj(sj))vi (s)
for some vi ∈ R×i∈I Si
• σi (si ) is the probability of i playing si according to σi .
Julio Davila Normal Form Games
![Page 10: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/10.jpg)
Normal form games... an example
L C R
U 2, 6 4, 4 8, 0D 0, 1 −1, 2 4, 5
payoff from
σ1 =”U with probability 1/3 and D with probability 2/3”,σ2 =”L with probability 1/4, C with probability 1/2, and Rwith probability 1/4”
u1(σ1, σ2) =1
3
(1
42 +
1
24 +
1
48
)+
2
3
(1
40− 1
21 +
1
44
)=
11
6
u2(σ1, σ2) =1
3
(1
46 +
1
24 +
1
40
)+
2
3
(1
41 +
1
22 +
1
45
)=
17
4
Julio Davila Normal Form Games
![Page 11: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/11.jpg)
Normal form games... an example
L C R
U 2, 6 4, 4 8, 0D 0, 1 −1, 2 4, 5
payoff from
σ1 =”U with probability 1/3 and D with probability 2/3”,σ2 =”L with probability 1/4, C with probability 1/2, and Rwith probability 1/4”
u1(σ1, σ2) =1
3
(1
42 +
1
24 +
1
48
)+
2
3
(1
40− 1
21 +
1
44
)=
11
6
u2(σ1, σ2) =1
3
(1
46 +
1
24 +
1
40
)+
2
3
(1
41 +
1
22 +
1
45
)=
17
4
Julio Davila Normal Form Games
![Page 12: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/12.jpg)
Normal form games... an example
L C R
U 2, 6 4, 4 8, 0D 0, 1 −1, 2 4, 5
payoff from
σ1 =”U with probability 1/3 and D with probability 2/3”,σ2 =”L with probability 1/4, C with probability 1/2, and Rwith probability 1/4”
u1(σ1, σ2) =1
3
(1
42 +
1
24 +
1
48
)+
2
3
(1
40− 1
21 +
1
44
)=
11
6
u2(σ1, σ2) =1
3
(1
46 +
1
24 +
1
40
)+
2
3
(1
41 +
1
22 +
1
45
)=
17
4
Julio Davila Normal Form Games
![Page 13: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/13.jpg)
rational players
Julio Davila Normal Form Games
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rational players
each player chooses his action so as to (try to) maximize his output
Julio Davila Normal Form Games
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strategies not played by rational agents
Julio Davila Normal Form Games
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strategies not played by rational agents
strictly dominated strategies:
σi is strictly dominatediff
there exists σ′i 6= σi such that, for all σ−i ,
ui (σi , σ−i ) < ui (σ′i , σ−i )
Julio Davila Normal Form Games
![Page 17: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/17.jpg)
strategies not played by rational agents
which strategies are strictly dominated?
σi is strictly dominated if, and only if, it is strictly dominatedagainst pure strategies,
i.e.there exists σ′i 6= σi such that, for all σ−i ,
ui (σi , σ−i ) < ui (σ′i , σ−i )
iffthere exists σ′i 6= σi such that, for all s−i ,
ui (σi , s−i ) < ui (σ′i , s−i ).
Julio Davila Normal Form Games
![Page 18: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/18.jpg)
strategies not played by rational agents
which strategies are strictly dominated?
σi is strictly dominated if, and only if, it is strictly dominatedagainst pure strategies,
i.e.there exists σ′i 6= σi such that, for all σ−i ,
ui (σi , σ−i ) < ui (σ′i , σ−i )
iffthere exists σ′i 6= σi such that, for all s−i ,
ui (σi , s−i ) < ui (σ′i , s−i ).
Julio Davila Normal Form Games
![Page 19: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/19.jpg)
strategies not played by rational agents
which strategies are strictly dominated?
σi is strictly dominated if, and only if, it is strictly dominatedagainst pure strategies,
i.e.there exists σ′i 6= σi such that, for all σ−i ,
ui (σi , σ−i ) < ui (σ′i , σ−i )
iffthere exists σ′i 6= σi such that, for all s−i ,
ui (σi , s−i ) < ui (σ′i , s−i ).
Julio Davila Normal Form Games
![Page 20: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/20.jpg)
strategies not played by rational agents
which strategies are strictly dominated?
σi is strictly dominated if, and only if, it is strictly dominatedagainst pure strategies,
i.e.for all σ′i 6= σi , there exists σ−i such that,
ui (σi , σ−i ) ≥ ui (σ′i , σ−i )
ifffor all σ′i 6= σi , there exists s−i such that,
ui (σi , s−i ) ≥ ui (σ′i , s−i ).
Julio Davila Normal Form Games
![Page 21: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/21.jpg)
strictly dominated strategies
”If”:
I assume that, for all σ′i 6= σi , there exists s−i such that
ui (σi , s−i ) ≥ ui (σ′i , s−i )
I then, for all σ′i 6= σi , there exists σ−i = s−i such that
ui (σi , σ−i ) ≥ ui (σ′i , σ−i ).
Julio Davila Normal Form Games
![Page 22: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/22.jpg)
strictly dominated strategies
”If”:
I assume that, for all σ′i 6= σi , there exists s−i such that
ui (σi , s−i ) ≥ ui (σ′i , s−i )
I then, for all σ′i 6= σi , there exists σ−i = s−i such that
ui (σi , σ−i ) ≥ ui (σ′i , σ−i ).
Julio Davila Normal Form Games
![Page 23: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/23.jpg)
strictly dominated strategies
”If”:
I assume that, for all σ′i 6= σi , there exists s−i such that
ui (σi , s−i ) ≥ ui (σ′i , s−i )
I then, for all σ′i 6= σi , there exists σ−i = s−i such that
ui (σi , σ−i ) ≥ ui (σ′i , σ−i ).
Julio Davila Normal Form Games
![Page 24: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/24.jpg)
strictly dominated strategies
”Only if”: (when all Si are finite)
I Assume, for all σ′i 6= σi , there exists σ−i such that
0 ≥ ui (σ′i , σ−i )− ui (σi , σ−i )
Julio Davila Normal Form Games
![Page 25: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/25.jpg)
strictly dominated strategies
”Only if”: (when all Si are finite)
I Assume, for all σ′i 6= σi , there exists σ−i such that
0 ≥ ui (σ′i , σ−i )− ui (σi , σ−i )
Julio Davila Normal Form Games
![Page 26: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/26.jpg)
strictly dominated strategies
”Only if”: (when all Si are finite)
I Assume, for all σ′i 6= σi , there exists σ−i such that
0 ≥ ui (σ′i , σ−i )−
∑s∈×i′∈I Si′
(∏j∈I
σj(sj))vi (s)
Julio Davila Normal Form Games
![Page 27: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/27.jpg)
strictly dominated strategies
”Only if”: (when all Si are finite)
I Assume, for all σ′i 6= σi , there exists σ−i such that
0 ≥ ui (σ′i , σ−i )−
∑s∈×i′∈I Si′
(σi (si )
∏j 6=i
σj(sj))vi (s)
Julio Davila Normal Form Games
![Page 28: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/28.jpg)
strictly dominated strategies
”Only if”: (when all Si are finite)
I Assume, for all σ′i 6= σi , there exists σ−i such that
0 ≥∑
s∈×i′∈I Si′
(σ′i (si )
∏j 6=i
σj(sj))vi (s)
−∑
s∈×i′∈I Si′
(σi (si )
∏j 6=i
σj(sj))vi (s)
Julio Davila Normal Form Games
![Page 29: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/29.jpg)
strictly dominated strategies
”Only if”: (when all Si are finite)
I Assume, for all σ′i 6= σi , there exists σ−i such that
0 ≥∑
s−i∈×i′ 6=iSi′
∑si∈Si
(σ′i (si )
∏j 6=i
σj(sj))vi (s)
−∑
s−i∈×i′ 6=iSi′
∑si∈Si
(σi (si )
∏j 6=i
σj(sj))vi (s)
Julio Davila Normal Form Games
![Page 30: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/30.jpg)
strictly dominated strategies
”Only if”: (when all Si are finite)
I Assume, for all σ′i 6= σi , there exists σ−i such that
0 ≥∑
s−i∈×i′ 6=iSi′
(∏j 6=i
σj(sj)) ∑
si∈Si
σ′i (si )vi (s)
−∑
s−i∈×i′ 6=iSi′
(∏j 6=i
σj(sj)) ∑
si∈Si
σi (si )vi (s)
Julio Davila Normal Form Games
![Page 31: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/31.jpg)
strictly dominated strategies
”Only if”: (when all Si are finite)
I Assume, for all σ′i 6= σi , there exists σ−i such that
0 ≥∑
s−i∈×i′ 6=iSi′
(∏j 6=i
σj(sj)) [ ∑
si∈Si
σ′i (si )vi (s)−∑si∈Si
σi (si )vi (s)]
Julio Davila Normal Form Games
![Page 32: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/32.jpg)
strictly dominated strategies
”Only if”: (when all Si are finite)
I Assume, for all σ′i 6= σi , there exists σ−i such that
0 ≥∑
s−i∈×i′ 6=iSi′
(∏j 6=i
σj(sj)) [
ui (σ′i , s−i )− ui (σi , s−i )
]
Julio Davila Normal Form Games
![Page 33: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/33.jpg)
strictly dominated strategies
”Only if”: (when all Si are finite)
I Then, for all σ′i 6= σi , there exists s−i such that
0 ≥ ui (σ′i , s−i )− ui (σi , s−i )
Julio Davila Normal Form Games
![Page 34: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/34.jpg)
Normal form games... an example
L C R
U 2, 6 4, 4 8, 0D 0, 1 −1, 2 4, 5
C is strictly dominated by
σ2 =”L with probability .7, C with probability 0, and R withprobability .3”
u2(σ1,C ) = σ1(U) (0 · 6 + 1 · 4 + 0 · 0)
+ σ1(D) (0 · 1 + 1 · 2 + 0 · 5) = 4σ1(U) + 2σ1(D)
u2(σ1, σ2) = σ1(U) (.7 · 6 + 0 · 4 + .3 · 0)
+ σ1(D) (.7 · 1 + 0 · 2 + .3 · 5) = 4.2σ1(U) + 2.2σ1(D)
Julio Davila Normal Form Games
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Normal form games... an example
L C R
U 2, 6 4, 4 8, 0D 0, 1 −1, 2 4, 5
C is strictly dominated by
σ2 =”L with probability .7, C with probability 0, and R withprobability .3”
u2(σ1,C ) = σ1(U) (0 · 6 + 1 · 4 + 0 · 0)
+ σ1(D) (0 · 1 + 1 · 2 + 0 · 5) = 4σ1(U) + 2σ1(D)
u2(σ1, σ2) = σ1(U) (.7 · 6 + 0 · 4 + .3 · 0)
+ σ1(D) (.7 · 1 + 0 · 2 + .3 · 5) = 4.2σ1(U) + 2.2σ1(D)
Julio Davila Normal Form Games
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Normal form games... an example
L C R
U 2, 6 4, 4 8, 0D 0, 1 −1, 2 4, 5
C is strictly dominated by
σ2 =”L with probability .7, C with probability 0, and R withprobability .3”
u2(σ1,C ) = σ1(U) (0 · 6 + 1 · 4 + 0 · 0)
+ σ1(D) (0 · 1 + 1 · 2 + 0 · 5) = 4σ1(U) + 2σ1(D)
u2(σ1, σ2) = σ1(U) (.7 · 6 + 0 · 4 + .3 · 0)
+ σ1(D) (.7 · 1 + 0 · 2 + .3 · 5) = 4.2σ1(U) + 2.2σ1(D)
Julio Davila Normal Form Games
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Normal form games... an example
L C R
U 2, 6 4, 4 8, 0D 0, 1 −1, 2 4, 5
C is strictly dominated by
σ2 =”L with probability .7, C with probability 0, and R withprobability .3”
u2(σ1,C ) = σ1(U) (0 · 6 + 1 · 4 + 0 · 0)
+ σ1(D) (0 · 1 + 1 · 2 + 0 · 5) = 4σ1(U) + 2σ1(D)
u2(σ1, σ2) = σ1(U) (.7 · 6 + 0 · 4 + .3 · 0)
+ σ1(D) (.7 · 1 + 0 · 2 + .3 · 5) = 4.2σ1(U) + 2.2σ1(D)
Julio Davila Normal Form Games
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Normal form games... an example
L C R
U 2, 6 4, 4 8, 0D 0, 1 −1, 2 4, 5
U strictly dominates D
U strictly dominates any other strategy
u1(U, σ2) =1 · (σ2(L) · 2 + σ2(C ) · 4 + σ2(R) · 8)
+ 0 · (0 · 0− 1 · 1 + 0 · 4)
=2σ2(L) + 4σ2(C ) + 8σ2(R)
u1(σ1, σ2) =σ1(U) (σ2(L) · 2 + σ2(C ) · 4 + σ2(R) · 8)
+ σ1(D) (σ2(L) · 0− σ2(C ) · 1 + σ2(R) · 4)
Julio Davila Normal Form Games
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Normal form games... an example
L C R
U 2, 6 4, 4 8, 0D 0, 1 −1, 2 4, 5
U strictly dominates D
U strictly dominates any other strategy
u1(U, σ2) =1 · (σ2(L) · 2 + σ2(C ) · 4 + σ2(R) · 8)
+ 0 · (0 · 0− 1 · 1 + 0 · 4)
=2σ2(L) + 4σ2(C ) + 8σ2(R)
u1(σ1, σ2) =σ1(U) (σ2(L) · 2 + σ2(C ) · 4 + σ2(R) · 8)
+ σ1(D) (σ2(L) · 0− σ2(C ) · 1 + σ2(R) · 4)
Julio Davila Normal Form Games
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Normal form games... an example
L C R
U 2, 6 4, 4 8, 0D 0, 1 −1, 2 4, 5
U strictly dominates D
U strictly dominates any other strategy
u1(U, σ2) =1 · (σ2(L) · 2 + σ2(C ) · 4 + σ2(R) · 8)
+ 0 · (0 · 0− 1 · 1 + 0 · 4)
=2σ2(L) + 4σ2(C ) + 8σ2(R)
u1(σ1, σ2) =σ1(U) (σ2(L) · 2 + σ2(C ) · 4 + σ2(R) · 8)
+ σ1(D) (σ2(L) · 0− σ2(C ) · 1 + σ2(R) · 4)
Julio Davila Normal Form Games
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Normal form games... an example
L C R
U 2, 6 4, 4 8, 0D 0, 1 −1, 2 4, 5
U strictly dominates D
U strictly dominates any other strategy
u1(U, σ2) =1 · (σ2(L) · 2 + σ2(C ) · 4 + σ2(R) · 8)
+ 0 · (0 · 0− 1 · 1 + 0 · 4)
=2σ2(L) + 4σ2(C ) + 8σ2(R)
u1(σ1, σ2) =σ1(U) (σ2(L) · 2 + σ2(C ) · 4 + σ2(R) · 8)
+ σ1(D) (σ2(L) · 0− σ2(C ) · 1 + σ2(R) · 4)
Julio Davila Normal Form Games
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Normal form games... an example
L C R
U 2, 6 4, 4 8, 0D 0, 1 −1, 2 4, 5
U strictly dominates D
U strictly dominates any other strategy
u1(U, σ2) =1 · (σ2(L) · 2 + σ2(C ) · 4 + σ2(R) · 8)
+ 0 · (0 · 0− 1 · 1 + 0 · 4)
=2σ2(L) + 4σ2(C ) + 8σ2(R)
u1(σ1, σ2) =σ1(U) (σ2(L) · 2 + σ2(C ) · 4 + σ2(R) · 8)
+ σ1(D) (σ2(L) · 0− σ2(C ) · 1 + σ2(R) · 4)
Julio Davila Normal Form Games
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strictly dominated strategies
if σi is strictly dominated, then any ρi playing σi with probabilityp > 0 is strictly dominated as well.
Julio Davila Normal Form Games
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strictly dominated strategies
let σi be strictly dominated,
i.e. there exists σ′i 6= σi such that, for all σ−i ,∑s−i∈×j 6=iSj
∑si∈Si
σi (si )∏j 6=i
σj(sj)vi (s) <∑
s−i∈×j 6=iSj
∑si∈Si
σ′i (si )∏j 6=i
σj(sj)vi (s)
Julio Davila Normal Form Games
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strictly dominated strategies
let σi be strictly dominated,
i.e. there exists σ′i 6= σi such that, for all σ−i ,∑s−i∈×j 6=iSj
∑si∈Si
σi (si )∏j 6=i
σj(sj)vi (s) <∑
s−i∈×j 6=iSj
∑si∈Si
σ′i (si )∏j 6=i
σj(sj)vi (s)
Julio Davila Normal Form Games
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strictly dominated strategies
Consider
I a strategy ρi consisting of playing σhi with probability ph, with
σ1i = σi and p1 = p > 0
I the strategy ρ′i for i consisting of playing σhi with probability
ph, with σ1i = σ′i and σh
i = σhi otherwise.
Julio Davila Normal Form Games
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strictly dominated strategies
Consider
I a strategy ρi consisting of playing σhi with probability ph, with
σ1i = σi and p1 = p > 0
I the strategy ρ′i for i consisting of playing σhi with probability
ph, with σ1i = σ′i and σh
i = σhi otherwise.
Julio Davila Normal Form Games
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strictly dominated strategies
Consider
I a strategy ρi consisting of playing σhi with probability ph, with
σ1i = σi and p1 = p > 0
I the strategy ρ′i for i consisting of playing σhi with probability
ph, with σ1i = σ′i and σh
i = σhi otherwise.
Julio Davila Normal Form Games
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strictly dominated strategies
then, for all σ−i ,
ui (ρi , σ−i ) =∑s−i∈×j 6=iSj
∑si∈Si
∑h
ph · σhi (si )
∏j 6=i
σj(sj)vi (s) <
∑s−i∈×j 6=iSj
∑si∈Si
∑h
ph · σhi (si )
∏j 6=i
σj(sj)vi (s)
= ui (ρ′i , σ−i )
Julio Davila Normal Form Games
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strictly dominated strategies
since, for all σ−i ,∑s−i∈×j 6=iSj
∑si∈Si
p · σi (si )∏j 6=i
σj(sj)vi (s) <
∑s−i∈×j 6=iSj
∑si∈Si
p · σ′i (si )∏j 6=i
σj(sj)vi (s)
Julio Davila Normal Form Games
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strictly dominated strategies
since, for all σ−i ,∑s−i∈×j 6=iSj
∑si∈Si
σi (si )∏j 6=i
σj(sj)vi (s) <
∑s−i∈×j 6=iSj
∑si∈Si
σ′i (si )∏j 6=i
σj(sj)vi (s)
Julio Davila Normal Form Games
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Normal form games... an example
L C R
U 2, 6 4, 4 8, 0D 0, 1 −1, 2 4, 5
I D is strictly dominated
Julio Davila Normal Form Games
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Normal form games... an example
L C R
U 2, 6 4, 4 8, 0D 0, 1 5, 2 4, 5
I D is not strictly dominated anymore
I C is strictly dominated
I D is strictly dominated, given that C will be played with 0probabilty
I R is strictly dominated, given that D will be played with 0probabilty
players will play U and L
Julio Davila Normal Form Games
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Normal form games... an example
L C R
U 2, 6 4, 4 8, 0D 0, 1 5, 2 4, 5
I D is not strictly dominated anymore
I C is strictly dominated
I D is strictly dominated, given that C will be played with 0probabilty
I R is strictly dominated, given that D will be played with 0probabilty
players will play U and L
Julio Davila Normal Form Games
![Page 55: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/55.jpg)
Normal form games... an example
L C R
U 2, 6 4, 4 8, 0D 0, 1 5, 2 4, 5
I D is not strictly dominated anymore
I C is strictly dominated
I D is strictly dominated, given that C will be played with 0probabilty
I R is strictly dominated, given that D will be played with 0probabilty
players will play U and L
Julio Davila Normal Form Games
![Page 56: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/56.jpg)
Normal form games... an example
L C R
U 2, 6 4, 4 8, 0D 0, 1 5, 2 4, 5
I D is not strictly dominated anymore
I C is strictly dominated
I D is strictly dominated, given that C will be played with 0probabilty
I R is strictly dominated, given that D will be played with 0probabilty
players will play U and L
Julio Davila Normal Form Games
![Page 57: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/57.jpg)
Normal form games... an example
L C R
U 2, 6 4, 4 8, 0D 0, 1 5, 2 4, 5
I D is not strictly dominated anymore
I C is strictly dominated
I D is strictly dominated, given that C will be played with 0probabilty
I R is strictly dominated, given that D will be played with 0probabilty
players will play U and L
Julio Davila Normal Form Games
![Page 58: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/58.jpg)
Normal form games... an example
it does not always solves the game:
L C R
U 2, 1 1, 2 1, 0M 1, 2 2, 1 1, 1D 0,−1 0, 0 10,−2
I Σ1 = {pU , pM , pD} and Σ2 = {pL, pC , pR}I R is strictly dominated
I Σ11 = {pU , pM , pD} and Σ1
2 = {pL, pC , 0}I D is (iteratively) strictly dominated
I Σ21 = {pU , pM , 0} and Σ2
2 = {pL, pC , 0}
Julio Davila Normal Form Games
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Normal form games... an example
it does not always solves the game:
L C R
U 2, 1 1, 2 1, 0M 1, 2 2, 1 1, 1D 0,−1 0, 0 10,−2
I Σ1 = {pU , pM , pD} and Σ2 = {pL, pC , pR}
I R is strictly dominated
I Σ11 = {pU , pM , pD} and Σ1
2 = {pL, pC , 0}I D is (iteratively) strictly dominated
I Σ21 = {pU , pM , 0} and Σ2
2 = {pL, pC , 0}
Julio Davila Normal Form Games
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Normal form games... an example
it does not always solves the game:
L C R
U 2, 1 1, 2 1, 0M 1, 2 2, 1 1, 1D 0,−1 0, 0 10,−2
I Σ1 = {pU , pM , pD} and Σ2 = {pL, pC , pR}I R is strictly dominated
I Σ11 = {pU , pM , pD} and Σ1
2 = {pL, pC , 0}I D is (iteratively) strictly dominated
I Σ21 = {pU , pM , 0} and Σ2
2 = {pL, pC , 0}
Julio Davila Normal Form Games
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Normal form games... an example
it does not always solves the game:
L C R
U 2, 1 1, 2 1, 0M 1, 2 2, 1 1, 1D 0,−1 0, 0 10,−2
I Σ1 = {pU , pM , pD} and Σ2 = {pL, pC , pR}I R is strictly dominated
I Σ11 = {pU , pM , pD} and Σ1
2 = {pL, pC , 0}
I D is (iteratively) strictly dominated
I Σ21 = {pU , pM , 0} and Σ2
2 = {pL, pC , 0}
Julio Davila Normal Form Games
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Normal form games... an example
it does not always solves the game:
L C R
U 2, 1 1, 2 1, 0M 1, 2 2, 1 1, 1D 0,−1 0, 0 10,−2
I Σ1 = {pU , pM , pD} and Σ2 = {pL, pC , pR}I R is strictly dominated
I Σ11 = {pU , pM , pD} and Σ1
2 = {pL, pC , 0}I D is (iteratively) strictly dominated
I Σ21 = {pU , pM , 0} and Σ2
2 = {pL, pC , 0}
Julio Davila Normal Form Games
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Normal form games... an example
it does not always solves the game:
L C R
U 2, 1 1, 2 1, 0M 1, 2 2, 1 1, 1D 0,−1 0, 0 10,−2
I Σ1 = {pU , pM , pD} and Σ2 = {pL, pC , pR}I R is strictly dominated
I Σ11 = {pU , pM , pD} and Σ1
2 = {pL, pC , 0}I D is (iteratively) strictly dominated
I Σ21 = {pU , pM , 0} and Σ2
2 = {pL, pC , 0}
Julio Davila Normal Form Games
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common ”knowledge” of rationality
players
I are rational,
I believe that all other players are rational,
I believe that all other players believe that all other players arerational,
I believe that all other players believe that all other playersbelieve that all other players are rational,
I ...
Julio Davila Normal Form Games
![Page 65: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/65.jpg)
common ”knowledge” of rationality
players
I are rational,
I believe that all other players are rational,
I believe that all other players believe that all other players arerational,
I believe that all other players believe that all other playersbelieve that all other players are rational,
I ...
Julio Davila Normal Form Games
![Page 66: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/66.jpg)
common ”knowledge” of rationality
players
I are rational,
I believe that all other players are rational,
I believe that all other players believe that all other players arerational,
I believe that all other players believe that all other playersbelieve that all other players are rational,
I ...
Julio Davila Normal Form Games
![Page 67: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/67.jpg)
common ”knowledge” of rationality
players
I are rational,
I believe that all other players are rational,
I believe that all other players believe that all other players arerational,
I believe that all other players believe that all other playersbelieve that all other players are rational,
I ...
Julio Davila Normal Form Games
![Page 68: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/68.jpg)
common ”knowledge” of rationality
players
I are rational,
I believe that all other players are rational,
I believe that all other players believe that all other players arerational,
I believe that all other players believe that all other playersbelieve that all other players are rational,
I ...
Julio Davila Normal Form Games
![Page 69: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/69.jpg)
iterative elimination of strictly dominated strategies
I strategies undominated after n rounds
Σni =
{σi ∈ Σn−1
i |∀σ′i ∈ Σn−1i , ∃σ−i ∈ ×j 6=iΣ
n−1j such that
ui (σi , σ−i ) ≥ ui (σ′i , σ−i )
}with Σ0
i = Σi , for all i .
I strategies never dominated
Σ∞i = ∩n∈NΣni
I if each Σ∞i is a singleton, then the game is solvable byiterated strict dominance
Julio Davila Normal Form Games
![Page 70: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/70.jpg)
iterative elimination of strictly dominated strategies
I strategies undominated after n rounds
Σni =
{σi ∈ Σn−1
i |∀σ′i ∈ Σn−1i , ∃σ−i ∈ ×j 6=iΣ
n−1j such that
ui (σi , σ−i ) ≥ ui (σ′i , σ−i )
}with Σ0
i = Σi , for all i .
I strategies never dominated
Σ∞i = ∩n∈NΣni
I if each Σ∞i is a singleton, then the game is solvable byiterated strict dominance
Julio Davila Normal Form Games
![Page 71: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/71.jpg)
iterative elimination of strictly dominated strategies
I strategies undominated after n rounds
Σni =
{σi ∈ Σn−1
i |∀σ′i ∈ Σn−1i , ∃σ−i ∈ ×j 6=iΣ
n−1j such that
ui (σi , σ−i ) ≥ ui (σ′i , σ−i )
}with Σ0
i = Σi , for all i .
I strategies never dominated
Σ∞i = ∩n∈NΣni
I if each Σ∞i is a singleton, then the game is solvable byiterated strict dominance
Julio Davila Normal Form Games
![Page 72: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/72.jpg)
strategies not played by rational players
L C R
U 2, 6 4, 4 8, 0D 0, 1 −1, 2 4, 5
I C is strictly dominated
Julio Davila Normal Form Games
![Page 73: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/73.jpg)
strategies not played by rational players
L C R
U 2, 6 4, 4 8, 0D 0, 1 −1, 3 4, 5
IIII C is not strictly dominated anymore
I L is optimal if U is played
I R is optimal if D is played
I C is never optimal
Julio Davila Normal Form Games
![Page 74: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/74.jpg)
strategies not played by rational players
L C R
U 2, 6 4, 4 8, 0D 0, 1 −1, 3 4, 5
I C is not strictly dominated anymore
I L is optimal if U is played
I R is optimal if D is played
I C is never optimal
Julio Davila Normal Form Games
![Page 75: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/75.jpg)
strategies not played by rational players
L C R
U 2, 6 4, 4 8, 0D 0, 1 −1, 3 4, 5
I C is not strictly dominated anymore
I L is optimal if U is played
I R is optimal if D is played
I C is never optimal
Julio Davila Normal Form Games
![Page 76: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/76.jpg)
strategies not played by rational players
L C R
U 2, 6 4, 4 8, 0D 0, 1 −1, 3 4, 5
I C is not strictly dominated anymore
I L is optimal if U is played
I R is optimal if D is played
I C is never optimal
Julio Davila Normal Form Games
![Page 77: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/77.jpg)
strategies not played by rational players
never optimal strategies:
σi is a never optimal strategyiff
for all σ−i , there exists σ′i 6= σi such that
ui (σi , σ−i ) < ui (σ′i , σ−i )
Julio Davila Normal Form Games
![Page 78: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/78.jpg)
strategies not played by rational players
strictly dominated strategies:
σi is strictly dominatediff
there exists σ′i 6= σi such that, for all σ−i ,
ui (σi , σ−i ) < ui (σ′i , σ−i )
Julio Davila Normal Form Games
![Page 79: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/79.jpg)
strategies not played by rational players
a strictly dominated strategy is never optimal
but a never optimal strategy needs not be strictly dominated
Julio Davila Normal Form Games
![Page 80: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/80.jpg)
strategies not played by rational players
a strictly dominated strategy is never optimal
but a never optimal strategy needs not be strictly dominated
Julio Davila Normal Form Games
![Page 81: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/81.jpg)
strategies not played by rational players
which strategies are never optimal?
if σi is never optimal, then it is never optimal strategy againstpure strategies,
i.e.if, for all σ−i , there exists σ′i 6= σi such that,
ui (σi , σ−i ) < ui (σ′i , σ−i )
thenfor all s−i , there exists σ′i 6= σi such that,
ui (σi , s−i ) < ui (σ′i , s−i )
Julio Davila Normal Form Games
![Page 82: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/82.jpg)
strategies not played by rational players
which strategies are never optimal?
if σi is never optimal, then it is never optimal strategy againstpure strategies,
i.e.if, for all σ−i , there exists σ′i 6= σi such that,
ui (σi , σ−i ) < ui (σ′i , σ−i )
thenfor all s−i , there exists σ′i 6= σi such that,
ui (σi , s−i ) < ui (σ′i , s−i )
Julio Davila Normal Form Games
![Page 83: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/83.jpg)
strategies not played by rational players
which strategies are never optimal?
if σi is never optimal, then it is never optimal strategy againstpure strategies,
i.e.if, for all σ−i , there exists σ′i 6= σi such that,
ui (σi , σ−i ) < ui (σ′i , σ−i )
thenfor all s−i , there exists σ′i 6= σi such that,
ui (σi , s−i ) < ui (σ′i , s−i )
Julio Davila Normal Form Games
![Page 84: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/84.jpg)
strategies not played by rational players
which strategies are never optimal?
if σi is never optimal, then it is never optimal strategy againstpure strategies,
i.e.if, for all σ−i , there exists σ′i 6= σi such that,
ui (σi , σ−i ) < ui (σ′i , σ−i )
thenfor all s−i , there exists σ′i 6= σi such that,
ui (σi , s−i ) < ui (σ′i , s−i )
Julio Davila Normal Form Games
![Page 85: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/85.jpg)
strategies not played by rational players
which strategies are never optimal?
if σi is never optimal, then it is never optimal strategy againstpure strategies,
2 thenthere exists σ−i = s−i such that, for all σ′i 6= σi ,
ui (σi , σ−i ) ≥ ui (σ′i , σ−i )
1 in effectif there exists s−i such that, for all σ′i 6= σi ,
ui (σi , s−i ) ≥ ui (σ′i , s−i )
Julio Davila Normal Form Games
![Page 86: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/86.jpg)
strategies not played by rational players
which strategies are never optimal?
if σi is never optimal, then it is never optimal strategy againstpure strategies,
2 thenthere exists σ−i = s−i such that, for all σ′i 6= σi ,
ui (σi , σ−i ) ≥ ui (σ′i , σ−i )
1 in effectif there exists s−i such that, for all σ′i 6= σi ,
ui (σi , s−i ) ≥ ui (σ′i , s−i )
Julio Davila Normal Form Games
![Page 87: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/87.jpg)
strategies not played by rational players
which strategies are never optimal?
but if σi is never optimal against pure strategies, then it needsnot be never optimal against all strategies,
In effect, is it true thatif, for all s−i , there exists σ′i 6= σi such that,
ui (σi , s−i ) < ui (σ′i , s−i )
thenfor all σ−i , there exists σ′i 6= σi such that,
ui (σi , σ−i ) < ui (σ′i , σ−i )?
Julio Davila Normal Form Games
![Page 88: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/88.jpg)
strategies not played by rational players
which strategies are never optimal?
but if σi is never optimal against pure strategies, then it needsnot be never optimal against all strategies,
In effect, is it true thatif, for all s−i , there exists σ′i 6= σi such that,
ui (σi , s−i ) < ui (σ′i , s−i )
thenfor all σ−i , there exists σ′i 6= σi such that,
ui (σi , σ−i ) < ui (σ′i , σ−i )?
Julio Davila Normal Form Games
![Page 89: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/89.jpg)
strategies not played by rational players
which strategies are never optimal?
but if σi is never optimal against pure strategies, then it needsnot be never optimal against all strategies,
In effect, is it true thatif, for all s−i , there exists σ′i 6= σi such that,
ui (σi , s−i ) < ui (σ′i , s−i )
thenfor all σ−i , there exists σ′i 6= σi such that,
ui (σi , σ−i ) < ui (σ′i , σ−i )?
Julio Davila Normal Form Games
![Page 90: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/90.jpg)
strategies not played by rational players
which strategies are never optimal?
but if σi is never optimal against pure strategies, then it needsnot be never optimal against all strategies,
In effect, is it true thatif, for all s−i , there exists σ′i 6= σi such that,
ui (σi , s−i ) < ui (σ′i , s−i )
1 In effect, is it true thatif, there exists σ−i such that, for all σ′i 6= σi ,
ui (σi , σ−i ) ≥ ui (σ′i , σ−i )
Julio Davila Normal Form Games
![Page 91: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/91.jpg)
strategies not played by rational players
which strategies are never optimal?
but if σi is never optimal against pure strategies, then it needsnot be never optimal against all strategies,
2 thenthere exists s−i such that, for all σ′i 6= σi ,
ui (σi , s−i ) ≥ ui (σ′i , s−i )?
1 In effect, is it true thatif, there exists σ−i such that, for all σ′i 6= σi ,
ui (σi , σ−i ) ≥ ui (σ′i , σ−i )
Julio Davila Normal Form Games
![Page 92: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/92.jpg)
strategies not played by rational players
which strategies are never optimal?
but if σi is never optimal against pure strategies, then it needsnot be never optimal against all strategies,
2 thenthere exists s−i such that, for all σ′i 6= σi ,
ui (σi , s−i ) ≥ ui (σ′i , s−i )?
1 In effect, is it true thatif, there exists σ−i such that, for all σ′i 6= σi ,
0 ≥ ui (σ′i , σ−i )− ui (σi , σ−i )
Julio Davila Normal Form Games
![Page 93: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/93.jpg)
strategies not played by rational players
which strategies are never optimal?
but if σi is never optimal against pure strategies, then it needsnot be never optimal against all strategies,
2 thenthere exists s−i such that, for all σ′i 6= σi ,
ui (σi , s−i ) ≥ ui (σ′i , s−i )?
1 In effect, is it true thatif, there exists σ−i such that, for all σ′i 6= σi ,
0 ≥∑
s−i∈×j 6=iSj
∏j 6=i
σj(sj)[ui (σ
′i , s−i )− ui (σi , s−i )
]
Julio Davila Normal Form Games
![Page 94: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/94.jpg)
strategies not played by rational players
which strategies are never optimal?
but if σi is never optimal against pure strategies, then it needsnot be never optimal against all strategies,
2 thenfor all σ′i 6= σi , there exists s−i such that,
ui (σi , s−i ) ≥ ui (σ′i , s−i )!
1 In effect, is it true thatif, there exists σ−i such that, for all σ′i 6= σi ,
0 ≥∑
s−i∈×j 6=iSj
∏j 6=i
σj(sj)[ui (σ
′i , s−i )− ui (σi , s−i )
]
Julio Davila Normal Form Games
![Page 95: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/95.jpg)
never optimal strategies
if σi is never optimal, then any ρi that plays σi with probabilityp > 0 is never optimal as well
Julio Davila Normal Form Games
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never optimal strategies
let σi be never optimal,
i.e. for all σ−i , there exists σ′i 6= σi such that∑s−i∈×j 6=iSj
∑si∈Si
σi (si )∏j 6=i
σj(sj)vi (s) <∑
s−i∈×j 6=iSj
∑si∈Si
σ′i (si )∏j 6=i
σj(sj)vi (s)
Julio Davila Normal Form Games
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never optimal strategies
let σi be never optimal,
i.e. for all σ−i , there exists σ′i 6= σi such that∑s−i∈×j 6=iSj
∑si∈Si
σi (si )∏j 6=i
σj(sj)vi (s) <∑
s−i∈×j 6=iSj
∑si∈Si
σ′i (si )∏j 6=i
σj(sj)vi (s)
Julio Davila Normal Form Games
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never optimal strategies
Consider
I a strategy ρi consisting of playing σhi with probability ph, with
σ1i = σi and p1 = p > 0
I the strategy ρ′i for i consisting of playing σhi with probability
ph, with σ1i = σ′i and σh
i = σhi otherwise.
Julio Davila Normal Form Games
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never optimal strategies
Consider
I a strategy ρi consisting of playing σhi with probability ph, with
σ1i = σi and p1 = p > 0
I the strategy ρ′i for i consisting of playing σhi with probability
ph, with σ1i = σ′i and σh
i = σhi otherwise.
Julio Davila Normal Form Games
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never optimal strategies
Consider
I a strategy ρi consisting of playing σhi with probability ph, with
σ1i = σi and p1 = p > 0
I the strategy ρ′i for i consisting of playing σhi with probability
ph, with σ1i = σ′i and σh
i = σhi otherwise.
Julio Davila Normal Form Games
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never optimal strategies
then, for all σ−i ,
ui (ρi , σ−i ) =∑s−i∈×j 6=iSj
∑si∈Si
∑h
ph · σhi (si )
∏j 6=i
σj(sj)vi (s) <
∑s−i∈×j 6=iSj
∑si∈Si
∑h
ph · σhi (si )
∏j 6=i
σj(sj)vi (s)
= ui (ρ′i , σ−i )
Julio Davila Normal Form Games
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never optimal strategies
since, for all σ−i ,∑s−i∈×j 6=iSj
∑si∈Si
p · σi (si )∏j 6=i
σj(sj)vi (s) <
∑s−i∈×j 6=iSj
∑si∈Si
p · σ′i (si )∏j 6=i
σj(sj)vi (s)
Julio Davila Normal Form Games
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never optimal strategies
since, for all σ−i ,∑s−i∈×j 6=iSj
∑si∈Si
σi (si )∏j 6=i
σj(sj)vi (s) <
∑s−i∈×j 6=iSj
∑si∈Si
σ′i (si )∏j 6=i
σj(sj)vi (s)
Julio Davila Normal Form Games
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iterative elimination of never optimal strategies
I strategies not never optimal after n rounds
Σni =
{σi ∈ Σn−1
i |∃σ−i ∈ ×j 6=i Σn−1j such that, ∀σ′i ∈ Σn−1
i ,
ui (σi , σ−i ) ≥ ui (σ′i , σ−i )
}with Σ0
i = Σi , for all i
I strategies never never optimal, a.k.a. rationalizablestrategies
Σ∞i = ∩n∈NΣni
I if each Σ∞i is a singleton, then the game is solvable inrationalizable strategies
Julio Davila Normal Form Games
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iterative elimination of never optimal strategies
I strategies not never optimal after n rounds
Σni =
{σi ∈ Σn−1
i |∃σ−i ∈ ×j 6=i Σn−1j such that, ∀σ′i ∈ Σn−1
i ,
ui (σi , σ−i ) ≥ ui (σ′i , σ−i )
}with Σ0
i = Σi , for all i
I strategies never never optimal, a.k.a. rationalizablestrategies
Σ∞i = ∩n∈NΣni
I if each Σ∞i is a singleton, then the game is solvable inrationalizable strategies
Julio Davila Normal Form Games
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iterative elimination of never optimal strategies
I strategies not never optimal after n rounds
Σni =
{σi ∈ Σn−1
i |∃σ−i ∈ ×j 6=i Σn−1j such that, ∀σ′i ∈ Σn−1
i ,
ui (σi , σ−i ) ≥ ui (σ′i , σ−i )
}with Σ0
i = Σi , for all i
I strategies never never optimal, a.k.a. rationalizablestrategies
Σ∞i = ∩n∈NΣni
I if each Σ∞i is a singleton, then the game is solvable inrationalizable strategies
Julio Davila Normal Form Games
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rationalizable strategies
σ is a profile of rationalizable strategiesiff
for all i ∈ I and all σ′i 6= σi ,there exists σ′−i such that
ui (σ′i , σ′−i ) ≤ ui (σi , σ
′−i )
Julio Davila Normal Form Games
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rationalizable strategies
L C R
U 3, 2 2, 3 1, 4M 2, 3 0, 0 2, 3D 1, 4 2, 2 3, 1
I C is never optimal
I M is never optimal
I thus Σ11 = {(pU , 0, pD)} and Σ1
2 = {(pL, 0, pR)}I can more strategies be eliminated?
Julio Davila Normal Form Games
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rationalizable strategies
L C R
U 3, 2 2, 3 1, 4M 2, 3 0, 0 2, 3D 1, 4 2, 2 3, 1
I C is never optimal
I M is never optimal
I thus Σ11 = {(pU , 0, pD)} and Σ1
2 = {(pL, 0, pR)}I can more strategies be eliminated?
Julio Davila Normal Form Games
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rationalizable strategies
L C R
U 3, 2 2, 3 1, 4M 2, 3 0, 0 2, 3D 1, 4 2, 2 3, 1
I C is never optimal
I M is never optimal
I thus Σ11 = {(pU , 0, pD)} and Σ1
2 = {(pL, 0, pR)}I can more strategies be eliminated?
Julio Davila Normal Form Games
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rationalizable strategies
L C R
U 3, 2 2, 3 1, 4M 2, 3 0, 0 2, 3D 1, 4 2, 2 3, 1
I C is never optimal
I M is never optimal
I thus Σ11 = {(pU , 0, pD)} and Σ1
2 = {(pL, 0, pR)}
I can more strategies be eliminated?
Julio Davila Normal Form Games
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rationalizable strategies
L C R
U 3, 2 2, 3 1, 4M 2, 3 0, 0 2, 3D 1, 4 2, 2 3, 1
I C is never optimal
I M is never optimal
I thus Σ11 = {(pU , 0, pD)} and Σ1
2 = {(pL, 0, pR)}I can more strategies be eliminated?
Julio Davila Normal Form Games
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rationalizable strategies
L R
U 3, 2 1, 4D 1, 4 3, 1
I since u1(σ) = (3pL + 1pR)pU + (1pL + 3pU)pD if{pL, pR} = {.5, .5}, then any {pU , pD} is optimal
I since u2(σ) = (2pU + 4pD)pL + (4pU + 1pD)pR if{pU , pD} = {.6, .4}, then any {pL, pR} is optimal
I thus Σn1 = {(pU , 0, pD)} and Σn
2 = {(pL, 0, pR)}, for all n
I rationalizabilty does not solve this game
Julio Davila Normal Form Games
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rationalizable strategies
L R
U 3, 2 1, 4D 1, 4 3, 1
I since u1(σ) = (3pL + 1pR)pU + (1pL + 3pU)pD if{pL, pR} = {.5, .5}, then any {pU , pD} is optimal
I since u2(σ) = (2pU + 4pD)pL + (4pU + 1pD)pR if{pU , pD} = {.6, .4}, then any {pL, pR} is optimal
I thus Σn1 = {(pU , 0, pD)} and Σn
2 = {(pL, 0, pR)}, for all n
I rationalizabilty does not solve this game
Julio Davila Normal Form Games
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rationalizable strategies
L R
U 3, 2 1, 4D 1, 4 3, 1
I since u1(σ) = (3pL + 1pR)pU + (1pL + 3pU)pD if{pL, pR} = {.5, .5}, then any {pU , pD} is optimal
I since u2(σ) = (2pU + 4pD)pL + (4pU + 1pD)pR if{pU , pD} = {.6, .4}, then any {pL, pR} is optimal
I thus Σn1 = {(pU , 0, pD)} and Σn
2 = {(pL, 0, pR)}, for all n
I rationalizabilty does not solve this game
Julio Davila Normal Form Games
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rationalizable strategies
L R
U 3, 2 1, 4D 1, 4 3, 1
I since u1(σ) = (3pL + 1pR)pU + (1pL + 3pU)pD if{pL, pR} = {.5, .5}, then any {pU , pD} is optimal
I since u2(σ) = (2pU + 4pD)pL + (4pU + 1pD)pR if{pU , pD} = {.6, .4}, then any {pL, pR} is optimal
I thus Σn1 = {(pU , 0, pD)} and Σn
2 = {(pL, 0, pR)}, for all n
I rationalizabilty does not solve this game
Julio Davila Normal Form Games
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rationalizable strategies
L R
U 3, 2 1, 4D 1, 4 3, 1
I since u1(σ) = (3pL + 1pR)pU + (1pL + 3pU)pD if{pL, pR} = {.5, .5}, then any {pU , pD} is optimal
I since u2(σ) = (2pU + 4pD)pL + (4pU + 1pD)pR if{pU , pD} = {.6, .4}, then any {pL, pR} is optimal
I thus Σn1 = {(pU , 0, pD)} and Σn
2 = {(pL, 0, pR)}, for all n
I rationalizabilty does not solve this game
Julio Davila Normal Form Games
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rationalizable strategies
L R
U 3, 2 1, 4D 1, 4 3, 1
I {pL, pR} = {.5, .5} is optimal only if {pU , pD} = {.6, .4} isexpected to be played
I {pU , pD} = {.6, .4} is optimal only if {pL, pR} = {.5, .5} isexpected to be played
I {pL, pR} = {.5, .5} and {pU , pD} = {.6, .4} is the only profileof rationalizable strategies no regreted ex post
or in which expectations are correct
Julio Davila Normal Form Games
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rationalizable strategies
L R
U 3, 2 1, 4D 1, 4 3, 1
I {pL, pR} = {.5, .5} is optimal only if {pU , pD} = {.6, .4} isexpected to be played
I {pU , pD} = {.6, .4} is optimal only if {pL, pR} = {.5, .5} isexpected to be played
I {pL, pR} = {.5, .5} and {pU , pD} = {.6, .4} is the only profileof rationalizable strategies no regreted ex post
or in which expectations are correct
Julio Davila Normal Form Games
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rationalizable strategies
L R
U 3, 2 1, 4D 1, 4 3, 1
I {pL, pR} = {.5, .5} is optimal only if {pU , pD} = {.6, .4} isexpected to be played
I {pU , pD} = {.6, .4} is optimal only if {pL, pR} = {.5, .5} isexpected to be played
I {pL, pR} = {.5, .5} and {pU , pD} = {.6, .4} is the only profileof rationalizable strategies no regreted ex post
or in which expectations are correct
Julio Davila Normal Form Games
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rationalizable strategies
L R
U 3, 2 1, 4D 1, 4 3, 1
I {pL, pR} = {.5, .5} is optimal only if {pU , pD} = {.6, .4} isexpected to be played
I {pU , pD} = {.6, .4} is optimal only if {pL, pR} = {.5, .5} isexpected to be played
I {pL, pR} = {.5, .5} and {pU , pD} = {.6, .4} is the only profileof rationalizable strategies no regreted ex post
or in which expectations are correct
Julio Davila Normal Form Games
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rationalizable strategies
σ is a profile of rationalizable strategiesiff
for all i ∈ I and all σ′i 6= σi ,there exists σ′−i such that
ui (σ′i , σ′−i ) ≤ ui (σi , σ
′−i )
Julio Davila Normal Form Games
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Nash equilibrium
σ is a Nash equilibrium profile of strategiesiff
for all i ∈ I and all σ′i 6= σi ,there exists σ′−i such that
ui (σ′i , σ′−i ) ≤ ui (σi , σ
′−i )
and σ′−i = σ−i
Julio Davila Normal Form Games
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Nash equilibrium
σ is a Nash equilibrium profile of strategiesiff
for all i ∈ I and all σ′i 6= σi ,
ui (σ′i , σ−i ) ≤ ui (σi , σ−i )
Julio Davila Normal Form Games
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Nash equilibrium
which strategy profiles are Nash equilibria?
if σ is a Nash equilibrium,then,
for all i , all si such that σi (si ) > 0, and all s ′i ,
ui (s′i , σ−i ) ≤ ui (si , σ−i )
Julio Davila Normal Form Games
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Nash equilibrium
which strategy profiles are Nash equilibria?
if σ is a Nash equilibrium,then,
for all i , all si such that σi (si ) > 0, and all s ′i ,
ui (s′i , σ−i ) ≤ ui (si , σ−i )
Julio Davila Normal Form Games
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Nash equilibrium
I assume not: for some i , some si such that σi (si ) > 0, andsome s ′i ,
ui (s′i , σ−i ) > ui (si , σ−i ).
I playing σ player i gets
σi (si )ui (si , σ−i ) +∑s′′i 6=si
σi (s′′i )ui (s
′′i , σ−i )
I deviating to s ′i whenever i should play si player i gets
σi (si )ui (s′i , σ−i ) +
∑s′′i 6=si
σi (s′′i )ui (s
′′i , σ−i )
I σi is not a best reply to σ−i
I σ is not a Nash equilibrium
Julio Davila Normal Form Games
![Page 128: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/128.jpg)
Nash equilibrium
I assume not: for some i , some si such that σi (si ) > 0, andsome s ′i ,
ui (s′i , σ−i ) > ui (si , σ−i ).
I playing σ player i gets
σi (si )ui (si , σ−i ) +∑s′′i 6=si
σi (s′′i )ui (s
′′i , σ−i )
I deviating to s ′i whenever i should play si player i gets
σi (si )ui (s′i , σ−i ) +
∑s′′i 6=si
σi (s′′i )ui (s
′′i , σ−i )
I σi is not a best reply to σ−i
I σ is not a Nash equilibrium
Julio Davila Normal Form Games
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Nash equilibrium
I assume not: for some i , some si such that σi (si ) > 0, andsome s ′i ,
ui (s′i , σ−i ) > ui (si , σ−i ).
I playing σ player i gets
σi (si )ui (si , σ−i ) +∑s′′i 6=si
σi (s′′i )ui (s
′′i , σ−i )
I deviating to s ′i whenever i should play si player i gets
σi (si )ui (s′i , σ−i ) +
∑s′′i 6=si
σi (s′′i )ui (s
′′i , σ−i )
I σi is not a best reply to σ−i
I σ is not a Nash equilibrium
Julio Davila Normal Form Games
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Nash equilibrium
I assume not: for some i , some si such that σi (si ) > 0, andsome s ′i ,
ui (s′i , σ−i ) > ui (si , σ−i ).
I playing σ player i gets
σi (si )ui (si , σ−i ) +∑s′′i 6=si
σi (s′′i )ui (s
′′i , σ−i )
I deviating to s ′i whenever i should play si player i gets
σi (si )ui (s′i , σ−i ) +
∑s′′i 6=si
σi (s′′i )ui (s
′′i , σ−i )
I σi is not a best reply to σ−i
I σ is not a Nash equilibrium
Julio Davila Normal Form Games
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Nash equilibrium
I assume not: for some i , some si such that σi (si ) > 0, andsome s ′i ,
ui (s′i , σ−i ) > ui (si , σ−i ).
I playing σ player i gets
σi (si )ui (si , σ−i ) +∑s′′i 6=si
σi (s′′i )ui (s
′′i , σ−i )
I deviating to s ′i whenever i should play si player i gets
σi (si )ui (s′i , σ−i ) +
∑s′′i 6=si
σi (s′′i )ui (s
′′i , σ−i )
I σi is not a best reply to σ−i
I σ is not a Nash equilibrium
Julio Davila Normal Form Games
![Page 132: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/132.jpg)
Nash equilibrium
which strategy profiles are Nash equilibria?
if σ is a Nash equilibrium,then,
for all i , all si , s′i such that σi (si ), σi (s
′i ) > 0,
ui (s′i , σ−i ) = ui (si , σ−i )
Julio Davila Normal Form Games
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Nash equilibrium
which strategy profiles are Nash equilibria?
if σ is a Nash equilibrium,then,
for all i , all si , s′i such that σi (si ), σi (s
′i ) > 0,
ui (s′i , σ−i ) = ui (si , σ−i )
Julio Davila Normal Form Games
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Nash equilibrium
L C R
U 3, 2 2, 3 1, 4M 2, 3 0, 0 2, 3D 1, 4 2, 2 3, 1
3pL + 2pC + 1pR = 2pL + 0pC + 2pR = 1pL + 2pC + 3pR
pL + 2pC − pR = 0
pL − 2pC − pR = 0
pL + pC + pR = 1
{pU , pM , pD} = {.5, 0, .5}
Julio Davila Normal Form Games
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Nash equilibrium
L C R
U 3, 2 2, 3 1, 4M 2, 3 0, 0 2, 3D 1, 4 2, 2 3, 1
3pL + 2pC + 1pR = 2pL + 0pC + 2pR = 1pL + 2pC + 3pR
pL + 2pC − pR = 0
pL − 2pC − pR = 0
pL + pC + pR = 1
{pU , pM , pD} = {.5, 0, .5}
Julio Davila Normal Form Games
![Page 136: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/136.jpg)
Nash equilibrium
L C R
U 3, 2 2, 3 1, 4M 2, 3 0, 0 2, 3D 1, 4 2, 2 3, 1
3pL + 2pC + 1pR = 2pL + 0pC + 2pR = 1pL + 2pC + 3pR
pL + 2pC − pR = 0
pL − 2pC − pR = 0
pL + pC + pR = 1
{pU , pM , pD} = {.5, 0, .5}
Julio Davila Normal Form Games
![Page 137: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/137.jpg)
Nash equilibrium
L C R
U 3, 2 2, 3 1, 4M 2, 3 0, 0 2, 3D 1, 4 2, 2 3, 1
3pL + 2pC + 1pR = 2pL + 0pC + 2pR = 1pL + 2pC + 3pR
pL + 2pC − pR = 0
pL − 2pC − pR = 0
pL + pC + pR = 1
{pU , pM , pD} = {.5, 0, .5}
Julio Davila Normal Form Games
![Page 138: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/138.jpg)
Nash equilibrium
L C R
U 3, 2 2, 3 1, 4M 2, 3 0, 0 2, 3D 1, 4 2, 2 3, 1
2pU + 3pM + 4pD = 3pU + 0pM + 2pD = 4pU + 3pM + 1pD
pU − 3pM − 2pD = 0
pU + 3pM − pD = 0
pU + pM + pD = 1
{pL, pC , pR} = { 9
14,− 1
14,
6
14}!!
Julio Davila Normal Form Games
![Page 139: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/139.jpg)
Nash equilibrium
L C R
U 3, 2 2, 3 1, 4M 2, 3 0, 0 2, 3D 1, 4 2, 2 3, 1
2pU + 3pM + 4pD = 3pU + 0pM + 2pD = 4pU + 3pM + 1pD
pU − 3pM − 2pD = 0
pU + 3pM − pD = 0
pU + pM + pD = 1
{pL, pC , pR} = { 9
14,− 1
14,
6
14}!!
Julio Davila Normal Form Games
![Page 140: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/140.jpg)
Nash equilibrium
L C R
U 3, 2 2, 3 1, 4M 2, 3 0, 0 2, 3D 1, 4 2, 2 3, 1
2pU + 3pM + 4pD = 3pU + 0pM + 2pD = 4pU + 3pM + 1pD
pU − 3pM − 2pD = 0
pU + 3pM − pD = 0
pU + pM + pD = 1
{pL, pC , pR} = { 9
14,− 1
14,
6
14}!!
Julio Davila Normal Form Games
![Page 141: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/141.jpg)
Nash equilibrium
L C R
U 3, 2 2, 3 1, 4M 2, 3 0, 0 2, 3D 1, 4 2, 2 3, 1
2pU + 3pM + 4pD = 3pU + 0pM + 2pD = 4pU + 3pM + 1pD
pU − 3pM − 2pD = 0
pU + 3pM − pD = 0
pU + pM + pD = 1
{pL, pC , pR} = { 9
14,− 1
14,
6
14}!!
Julio Davila Normal Form Games
![Page 142: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/142.jpg)
Nash equilibrium
L C R
U 3, 2 2, 3 1, 4M 2, 3 0, 0 2, 3D 1, 4 2, 2 3, 1
3pL + 1pR = 1pL + 3pR
2pL − 2pR = 0
pL + pR = 1
{pL, pC , pR} = {.5, 0, .5}
Julio Davila Normal Form Games
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Nash equilibrium
L C R
U 3, 2 2, 3 1, 4M 2, 3 0, 0 2, 3D 1, 4 2, 2 3, 1
3pL + 1pR = 1pL + 3pR
2pL − 2pR = 0
pL + pR = 1
{pL, pC , pR} = {.5, 0, .5}
Julio Davila Normal Form Games
![Page 144: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/144.jpg)
Nash equilibrium
L C R
U 3, 2 2, 3 1, 4M 2, 3 0, 0 2, 3D 1, 4 2, 2 3, 1
3pL + 1pR = 1pL + 3pR
2pL − 2pR = 0
pL + pR = 1
{pL, pC , pR} = {.5, 0, .5}
Julio Davila Normal Form Games
![Page 145: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/145.jpg)
Nash equilibrium
L C R
U 3, 2 2, 3 1, 4M 2, 3 0, 0 2, 3D 1, 4 2, 2 3, 1
3pL + 1pR = 1pL + 3pR
2pL − 2pR = 0
pL + pR = 1
{pL, pC , pR} = {.5, 0, .5}
Julio Davila Normal Form Games
![Page 146: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/146.jpg)
Nash equilibrium
L C R
U 3, 2 2, 3 1, 4M 2, 3 0, 0 2, 3D 1, 4 2, 2 3, 1
2pU + 4pD = 4pU + 1pD
2pU − 3pD = 0
pU + pD = 1
{pU , pM , pD} = {.6, 0, .4}
Julio Davila Normal Form Games
![Page 147: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/147.jpg)
Nash equilibrium
L C R
U 3, 2 2, 3 1, 4M 2, 3 0, 0 2, 3D 1, 4 2, 2 3, 1
2pU + 4pD = 4pU + 1pD
2pU − 3pD = 0
pU + pD = 1
{pU , pM , pD} = {.6, 0, .4}
Julio Davila Normal Form Games
![Page 148: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/148.jpg)
Nash equilibrium
L C R
U 3, 2 2, 3 1, 4M 2, 3 0, 0 2, 3D 1, 4 2, 2 3, 1
2pU + 4pD = 4pU + 1pD
2pU − 3pD = 0
pU + pD = 1
{pU , pM , pD} = {.6, 0, .4}
Julio Davila Normal Form Games
![Page 149: Normal Form Games - CES: Centre d'Économie de la …cermsem.univ-paris1.fr/davila/teaching/gradmicro2/1_Normal_Form_… · A normal form game is a collection fS i;u ig ... Julio](https://reader031.vdocuments.mx/reader031/viewer/2022022017/5b79dc397f8b9ae1328ba6f5/html5/thumbnails/149.jpg)
Nash equilibrium
L C R
U 3, 2 2, 3 1, 4M 2, 3 0, 0 2, 3D 1, 4 2, 2 3, 1
2pU + 4pD = 4pU + 1pD
2pU − 3pD = 0
pU + pD = 1
{pU , pM , pD} = {.6, 0, .4}
Julio Davila Normal Form Games