1- Firs+ conaide9 the payoff mataix 1

and fGnd
2- Now tate playor 1 into Corsideonation
nak it wuith
the lagest pouyoff Vale vestically and
Stay

3. Then take elayen 2 into consideaion and God

the laoqest payoff vaue hoi zon tally hd mcnk it sk

onic3S
Suspect 2
Queit
3,o
Qeit

Cor fe 2.-2

quite, we check
Hee:* Firs t for suSpect 4 when b2 is
to [Link])
-l, and o and put stest we check
s confessing
* For suspcct 4, when playe2
and put stu to
-2.(Lagt)
9 nd -2 cund o
when pi is Quelt 3 we check
4 For sUspect 2)
ther
Put Staet to o . (Laiget)
cOnfessirg , we check -3
when pl
t FoY Suspect 2,
and -2 Cnd put Sta to -2.
(Lawges)
Contains tuoo stagu s Conside9ed as
4. The cell that
Dilemma (canfess,
pure nazh eqibum. So in prisoney
Confess ) oT (-2,-2) is a pure nash
eguilbum.

he o) Cne Crtue
 Bachh c Stranviry
2- Araly the Jame it inal roccde)
i b i u n i f it

to gethe
Thee CmC un ronCots available. Bach aY SttLnVingk4 ae
he tuO [Link] PrtfeS Cach and other pvefe91 S
ot them
J thy qo to different ConcoMtS each
Stravn+
ceill oe nlly unhopry
Te payoff mct'x wil be

1 Bch Strovincut

Boch O.0

Shovry

Accosding to the p off matrix if both go to diffeen+

(o, o).
Concnts , the wil be nhappy uwhich is Shown as
PeSon 2 goes to Bach concet with person 1 +hen
J+
the penEon 1 s more happy as they ae togthen shaun
with perion2
(2, ) If peson 1 g0es to Stravieh
then pe130n2 wiu be moe happy a they ae togetha
shoun as (,2).

lo check nagh equiibium:

[Link] considen the above pa off mtrix
2. Now take peson 4 into coneidenatHon and find

the lagelt payoff vawe ventical nd mak it wtha

Stas.
So, we check between 2 cnd o ’ 2 s >POn
qrecteschs
(sta).
check betuweon o Cund I S greater (St).
 consdation und find the
3. Then take playz Lnto
a sta.
jest payot valwe horizon taly and maak it with Qash
So, we chec lk betuen and o ’ ) 3 greCHen (Sta),
Psng choo1e. Stravi gl

we chec k between o and 2 ’ 2 u greaten (stas).

P2
PI Bach Stravisky
Coch

Sovity

4 The call containing two stags consi dared s

puse nash eq ubium So in BOS ndel (2, ) oY (each,

Bach) and (ii2) o (stro% vinsky, Stanavinsky) is a pure
nash ea,oiibriu.
 6 Analy ze he
game (hg ilcomate
nd ind the pure nah cileiw
to rhonse head
this mdel, (o people cY'
tail Cund shu) bhe'a choice Árnultenegusl| Ihey
both show the same siceie HH) or ( , T) then
Peson 1 peoson 2. uil get a dollc. IE they ge|
show diffeent sides ie (H,T) Or (TiH) the peson2

will get a dollc, Each playe only thines about thuir

pYfi't I the ha ve Same side eon 2
cdolla to pHSon 4 and they hoane diffesent sidas
then pegson 4 a doll c to peNAon 2:
wil pay
The payoff matrix will be:
P
P2 Peon )

To check nash equiibrium:

I Ne ave to Coneide pcyoff matix -

2. Now take playeo 1 nto considenction and ind

the laegest payof Value vethcally and mak ith a
So, we check hene |:and - ’ | is qreote
we check hee -| and1’1 qreater.
2

1,1
 playe2 cnto conzitoion Cnd find the
3. Now tate
ontontaly cnd ank with a St
lase pyoff ve Le
So, we check - and 1s Areate (Stan)

heck and

-1, 1

consideed pure
cell containúg tuO stuS s
4. The
are no
So n mathing pennies thee
nash eauilbium
nag h equi ibium.
 tre
4 Aralyze
Equiubriun
the pre rasr hurien ey hove hu
In thu mte) these
hunt Cny of tha2e.
Cptiora - Stag Hame They
tuo
huntes4 chooseI to hunt
If both the

JS hunton hooses, to otch

it
animal they shane
hunten gets who hunts
hare, the Stag ecapel ard the
the nane gets t

The puoff rnotiy :

tlrtc12

Stag
2,2

Hare

If both catehes stag theu get equal shnaone (2)2) assumg

that the meat o stag s doube of Uhe hane.
one of tha hooseg to hut hane then
J ethes
then ie (lo) oy(o,).
Stog e3 capes and the nhunte gets nothing
To check nash eaoiúbium
I We have to cosi den the aboe Payore rtriA.

2. Now take play into considenation and

5nd the lasgn payoff vawe vea tically nd mak it
Sith a Stas. nHuntes1) hooSes
So we check 2 and I ’ 2 i qreateo (sta).
Hunteo2chosse
we checlk and 1 ’ qYeates (sta).
 P?
urte 1 Hae
SLag
2,2
Stag

3- Now take play4 2 into consideration and find

Vae cund maak it with a sta.
the latge peyo
So, we check 2
Hae
- Hurtetg choose
we Check and 91 greaten (Sta).
P Huntes2 ’
Hunto 1 Stag Hane
Staq
Hasne 1,oi,

4. The cell Stan Qe pute nash

contaning too

equiibnum. So (2 2) and Ci, I) ane Pore nag h

equi brum.
 5. What s Gar beoy
behavT
Ihe Study o-f shoteyially inclependent nd iCe. yeoS
çects 8'
independence is what A' o c
leing- oh eoe
X Gjcme The ony in teactve decision
Stodies

{he OUtCome for ech paticipcnts or

"playe" depends
On the acion of all.

how
Provldos a framerk For undoztandig
Individuas oY 1YDup maw cecislon that will n+luene
One notheo1, often io situatton8 whee the intees ts

care ei then petially OY whally conficing

The key concepts of game theong:
1. Playess The decsion makes the qame.

2 Strategies - The possible actions that each playr

Can tare.

3 Pay ofF - The outcome TSutting From combination

of styategies
4. Games- The scaraics o modely which

playeo inteact
5. Equilibrium - Key concept in Jame theony whee each
player's sthategy is opimal.
aame theery (ong ists o% colle ction of modes
Model is an abshaction we Be tu undo9utand our obsona
tion crd expeiences.

(ame theoy allbwS wy +o oickly daw pamallels from

Situation to Cn othe.
6De ine
ituoicn u. called
1) Stvaegic arne Acompe Hbva
agic yane,if it hay foll wjng propontea:
A Get of playou
for cach playen,a Set of actionz
tor ech plajen Prefenenco, oven the iet of OcHon
Profiles

2)Nash Equili boriurn Jt i a set of tratraics , one feor

each playen , Such lhat no playon has opton to change hig
o1 ha stTveg4 given uhat olhen playes He doing

1,2

) Shct nagh equubiurn

For a genenal gane, an equilibium is stict if each playls
equiibmum actia s bedten than thair then aciony, giren
other playen's acione. Ptcisely an action Pofile a *
a shict nagh equiibnum if for eveut playen i we have
uilas)> ui(aia) for evey action ai t ai# of
play.
4) Best Yaporge funchon
Astrotegt ia a best reg parze if a plauyen canrot
gain nore uthity From switehing to a diffenent shategy
B:(a -i)= lai in Ai : UiCai,a-) U;(ai', ai) for al
ai in AiS,
The arcled ones cne hah equilbrl
(2.)o,o found ot by sírg be+ responge
methoal.
 5) Arict iornnatin

T wt
M tricy

P.

equiubiun
[heneferes no raah

6) weok Onothen achon, if

dorninatea
action ue ary. second action,
A pryen
what
ctheg do.

dominates T
Hete M weaky
B dominatee

B s t t y dominates T.
 1) Appl4 dominates methad to d the nash egiibrium

Dominted strategíes fur plye i

Conpane dominctes M and
not
fOy L ’ 13>4 does
M does
not clominates U
|3

Fos K 1 > 6

CompaMe
Foy L 3> dues not dominateg an d

c’ <2
foy due not dominates
For R 7 <3
M and D
CompCne
L ’ 4> nut
M does dom inaies D. d
For C’3>2
clueen't dornirte M
Fox RG<8
te etinate ocottmm

Game matix afte updating

L

T3

Dominated strategy for playen 2:

|Conpcne L and c
3<4 rol Cnd vca
L
u cdomi nated by c. vetea
foy M )<3
 ompane and R

FoY 33 Aominate
L doea not
Fos M |e2

Emeene
FOs playe 2 domnaed by C We can e imínate

RColem
M: We Can e l i i nete D Yw
clormincted by
B strity dominated by C Thus
Can
For pl ay 2, L

dlomina4ed by M: hus we Can

foY Play ,U s strity
the

Finally:

6,2 M

33

Cpure nash Eqwlibiun)

M3:
 ) Arayze Best response Function to ind
in: naah eq, uilibium

|3

D -\, 8, 1
2

’Find each pl ayos best reapnie funchon bH

Hndinq
the acHon thot maximises its payof
Poy Cuny aiven
ation of othan plye.
’ Con3id2 the
pour a,a2) of action oith the probablty
that playrl's action a beg+ relponse to playen2's
action cund playes 2s action
Tesponse to playal's
action.

Fos playe 1 Consides the best Yesponze

in the payot
vertiaaly in each coumn and mak wtth a stag.

3>| 2 ’ 3 stuned.
73

|3,2 612

Foy ployen 2 Considan the best Yesponse in the payo+

hoí zon taly in each Ow cund mamk wth a Stun.
R
Hete, 43,3 s Stared.
372 3 s stused

Thee fore (3,3) is the nah equilibrium usng best respnse

 matx to find the ash
) Analyse the below payoff
check Lwhehey it U a Stict nash
eqquii bum and
equubn un not with ppopiate rea3oning

by bet responze mehd.

Nash equiibium
choases L the bet esponye
when player 2
+ Fos playci
):
both
and 8 (becaue l
choose c the lb esk Yespoe
* For playen | when playen2
is T (1>o).
the bet mespose
when playen 2 chgoSeA R
* Foy playy1

pluyeM 1 chooSe T tha bo t lponse

t Eor playe2 when
and R CI>o).
chooses B the best esponye
player 2 ohen playerI
* For
cCI>o)
sto for bl he vawing hav ing best

rSpons. e. C R

Payel

',o

Eyom the cbone e

()ie (T,) nash eyulibriun
get
lout it not stict nash equiibium Playen 's best

Yesponie to L looth T cnd rot and sinilauy

Playe2 's begt responge Fos T u both L and R oat
 deteomne foY eaeh othen
to
TO) Analyze the belo w gane walky dorninte
actHOn
clominated
methool
gane detemne oheneve
Equi i bnum the
Find the nas h
siet.
Cany eqiubim is
 MODU LE 2

MIXED STRATEGY CQUlUERIOM

DApply mixed strategy alqorithm to Sind the

cxpecked
Pouyof for each Flayt in the game of matehing
penns

Payoff for
Payet
Matching Pernies

For playea 1:
EH= Pa )+ ((P)) ET PHCi) (-pH) ()
PH-|+ H

(Pu=P)
EH= ET

Fos playrz:
ET= QH1)t(- QH)U)

(qng) (qHq)
EH ET

t4 |t1 49, =2
 Now lby mixed sthategY eguiubriu

Expec trd payoff

Expe cted payoff for p ay 1

-(0* y4) + (-I*V4) + (x y4)t (i* Va)

2:
Expected paycoff for Play
-xy) + x y) + (" yu) +(-1* ya)
 vateay gunhrn o Hnd the experted
) Arpty mvcd
|Py off dch ployeo n e s ncdel.
in the Bs
Tinding exped payof for cach playen
ing mized stratrgy lguri thor
Payoff fos Bos

Playen 5 Mixed tratgy:

CaEs

Ce- P ) + (rp)(o) Ese p(o)+ (4-p) 2

ErgES
p-p

Playea 2's Mixed Shatay :

Es 4 (o) + (r))
24,

EpeEs

Naw, by Miyed SraBegy algorithm

 APpy miyed Stratg ge
Payee c sah nlam

Expected playoff:

S(Va)

Expected payoff for player 1:

- 2 /4) +(ox /4) +(ox y4)+ (x2/4)

Expected payotf for playen 2!

( xa)t e(ex /a) + (0x ya (2x /a)

Y4+o+0+ tl4
 ed

Fayoff fer each playn nfellour pere

E p(2) +(-p)() ED-Pa) t ((-p) (o)

e 1-4p

ETe Ep
I-4p:2p

For plauyer 2:
EL: 4 (3) + (rq) (2)
34 -L+24,
-54-2
EL= Ec

54-2
2yoff mah brËunm thr
Yes ponse

Now, by mixed stYategy algosithm:

Expeted payoff:
L()2)

1:
Expected payoff fot plye ios)
+ (- x 5]1s) + (ox
ys) +(-2xya)
= 3
/b- 4 -5/1s
2:
for playeu
Expectd payot i8)
yi) t (1x 5]s) +(Ox
(-3 x /1s) +(2
+ 2/9 t 5/18
-3|1s
6|18 2s.
 4) Applay method of bet ves ponse to fnd mixed trategY
hash e4, utubrium in the game of mtching pems

Payoif for matching pennies

He

ier playea 2's mised strategy playn is expecked

Payoff Fo H is :
4)+(i-4) )= 24, -l

Gtien playes 's mixed Strateg playy i's xpected

Pyoff foy T u:.
(-) + (ig))= |-24,
then playn 1 chooses T, p<o
then play 1 choses H ) pel
Chose H O T.
if /2 then playe Can

The bagt Tesponse of playN1 to 4 is :

if q</2
&i(4)

playui's mixed Sstrateg »plyr 2's expeced

Given
pay of foo H s:

Given phya )'s mized Shratgy » Playey 2's expected f

foy Ti P)+ i p ) ) Qp-l
 P< 2 then playea 2 ChooSes
then plauay 2 hoo se T, q 0

P '2 4he playau2 chn c o s e T.

The best vesponse of playon

raph:

P2 P

P>

The nazh eqvilbiuun (Y2, 2)

 ) A ly nc thal o hest espge to ind rie tsatry

flayen s mxed straegy playeni's expected paptf

Playen 2's mirOd stratg9 playui's exprcted poyot

f <V3 then playe choosu S Pzo

playu
then ply ehooses ithen e

Giwn playe 's mixed stsatey, Plyn 2's expeced payot

for

Gien playni's mixd shrat playe 's expeted pay

foy S
plo)+rpKe)- 2lp
then Plag
thun ply Chosea eithr B o S.

then
play2 chooses B, 9l:
 B(p) =

if P> 2|2

U2l3

Graph: ,1)

PI
p2

The nash equiibrum (oyo) (i, ) and (33)