Games with
simultaneous
moves
Session 4
Game - pricing
Two competing manufacturers who have to decide on pricing – High (H) or
Player 2 Low (L) and
payoffs are H>C>D>L
H low, each gets D. When
If both players choose high, each gets C, while if both choose L one
chooses high and the other chooses low, the one choosing high gets L and the one choosing
low gets H.
H C,C L, H
Player 1 L H, L D,D
2/2/20XX PRESENTATION TITLE 2
Games with simultaneous moves
•Where players choose from finite discrete pure
strategies.
•Some examples – manufacturers, voting, goalie and
striker
•Imperfect information
•Solution – Look for Nash Equilibrium
•Look for equilibrium -
• Dominance
• Solvability
• multiple equilibria
• non-existence of equilibrium
2/2/20XX PRESENTATION TITLE 3
Pay-off Table
Games with simultaneous moves
•Each player has one move/strategy i.e. strategy
and action are the same – no distinction
•Interests are opposing – what is lost by one is gain
for another and vice-versa – ZERO-SUM Game
•Use Game Table for examining trade offs
2/2/20XX PRESENTATION TITLE 5
Cell by cell search for
dominance/Nash
Equilibrium;
Ennumeration
given that row is choosing low, column's best response is
to choose middle. Similarly, if column chooses middle,
Nash Equilibrium row's best response would be to choose low
Non-Co-operative game – making choices independently
Neither changes their position on their own – maximise
outcome
Nash Equilibrium is a list of strategies, one for each
player, such that no player can get better payoffs by
switching to some other strategy that is available to her
while all the other players adhere to the strategies
specified for them in the list
2/2/20XX PRESENTATION TITLE 8
*highlighted numbers are the altered ones
Column
No Dominance
Left Middle Right
Top 3, 1 2, 3 10, 2
High 4, 5 3, 0 9, 4
Row
Low 2, 2 5, 4 12, 3
Bottom 5, 6 4, 5 9, 7
BEST-RESPONSE ANALYSIS ... just the method
- begin with row, like what is the best response of row
if column chooses left, middle, etc. etc.
Column
- then jump to column, like what is the best response
of column if row chooses top, high, etc..
Two equilibria Left Middle Right
Top 3, 1 2, 3 10, 2
High 4, 5 3, 0 9, 4
Row
Low 2, 2 5, 4 12, 3
Bottom 5, 6 4, 5 9, 6
Column
No equilibrium
in pure
strategies Left Middle Right
Top 3, 1 2, 3 10, 2
High 4, 5 3, 0 9, 4
Row
Low 2, 2 3, 4 12, 3
Bottom 5, 6 4, 5 9, 7
*one strategy is uniformly worse or better than other
Dominant Strategy
PRISONER’S
DILLEMMA
*I have found Nash equ. first using BRA, then thought about which
strategy is dominant of whom
One player has dominant strategy
*both firms' enter strategy is better no matter what
Firm 2
Super Dominant
Strategy
Enter Not
Enter $100M, $100M $500M, $0
Firm 1
Not $0, $500M $0, $0
In the second game, both firms have already entered the market and
now decide what price to charge. For concreteness, suppose that there
are 10 million customers, each of whom will buy from one of the two
firms, and that each firm decides whether to charge $20 or $30 (with
costs of zero). If both firms charge the same price, they will each sell
to 5 million customers, but if one charges the low price ($20) and the
other charges the high price ($30), 8 million will buy from the
low-price firm and 2 million will buy from the high-price firm.
*remember tie-breaker
Firm 2
Strict Dominance vs.
Weak dominance D
d
Price = $30 Price = $20
d
Price = $30 $150M, $150M $60M, $160M
D
Firm 1
Price = $20 $160M, $60M $100M, $100M
Ibrahim
Steal Split
Steal £0, £0 £13,600, £0
Nick
Split £0, £13,600 £6,800, £6,800
Best Response
Analysis
Thank You
2/2/20XX PRESENTATION TITLE 22
