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Homework 2

This document provides instructions and problems for a homework assignment on game theory and Nash equilibria. It includes 5 problems analyzing different games in strategic form involving salary negotiations on a city council, campaign spending between political parties, bargaining over goods, and contributing to a public good. Students are asked to find and describe all Nash equilibria in pure strategies for each game.

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Luka Janjalashvili
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112 views

Homework 2

This document provides instructions and problems for a homework assignment on game theory and Nash equilibria. It includes 5 problems analyzing different games in strategic form involving salary negotiations on a city council, campaign spending between political parties, bargaining over goods, and contributing to a public good. Students are asked to find and describe all Nash equilibria in pure strategies for each game.

Uploaded by

Luka Janjalashvili
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Game Theory

Giorgi Piriashvili Homework 1 Fall 2023

Goals and Instructions.


This homework aims to help you familiarize yourself with Nash Equilibrium (NE) concept. I encourage
you to work in groups but upload your own work! The best learning happens when you share ideas and
absorb ideas of others (working in groups) and when you work independently (write down your own solution).
Please, upload a scanned copy of your answer as PDF file on Moodle. The deadline for this homework is
October 14, 11:59 PM.

Problem 1. Games in Strategic Form.


Find all Nash Equilibria (in pure strategies) of the following games:

Problem 2. Salary in City Council.


A town council consists of three members, Tom, Dick and Harry, who vote every year on their own
salary increases. Each can vote “Yes” or “No.” Two Yes votes are needed to pass the increase and voting
is simultaneous. Each member would like a higher salary, but would like to vote against it himself because
that looks good to the voters. Specifically, the payoffs of each are as follows:

Choice of Action Payoff


Raise passes, own vote is No 10
Raise fails, own vote is No 5
Raise passes, own vote is Yes 4
Raise fails, own vote is Yes 0

Find all Nash Equilibria (in pure strategies).

Problem 3. Campaign Spending.


The Labour and Conservative parties choose their advertising budgets for an election, denoted by x and
y respectively (assume x, y > 0). They dislike campaign spending, but wish to obtain a higher share of
y
the vote. Advertising is the sole determinant of the election outcome, yielding vote shares of x+y
x
and x+y
respectively.

Suppose that payoffs are given by “vote share minus advertising costs", so that
x x
UL (x, y) = − x and UC (x, y) = −y
x+y x+y

• Find Labour’s best response on Conservative’s choice y

• Find all Nash Equilibria (in pure strategies)

Problem 4. Simple Bargaining Game.


Consider the following simplified bargaining game. Players 1 and 2 have preferences over two goods, X
and Y . Player 1 is endowed with one unit of good X and none of good Y , while 2 is endowed with one unit
of Y and none of good X. Player i has utility function min(xi , yi ) where xi is i’s consumption of X and yi

1
his consumption of Y .

The bargaining works as follows. Each player simultaneously hands any (non-negative) quantity of the
good he possesses (up to his entire endowment) to the other player.

• Question 1 Write this as a game in strategic form (set of players, set of actions, payoff functions)

• Question 2 Find all pure strategy equilibria of this game.

• Question 3 Does this game have a dominant strategy equilibrium? If so, what is it? If not, why not?

Problem 5. Public Good Game.


Suppose we have an economy with N people. There is a public good which is only provided if at least
one person gives up c ∈ (0, 1) dollars to pay for it. Consider the following game. Each person simultaneously
decides whether or not to contribute c. If at least one person contributes c, each contributor gets 1 − c and
each non-contributor gets 1. If no one contributes, everyone gets a payoff of zero. Find all Nash equilibria
of the game (in pure strategies)

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