Iterative Deletion of Strictly Dominated Strategies

ECON 319: Game Theory

Daniel Neururer
University of Otago
Department of Economics

30 July 2024

Game Theory (ECON 319) IDSDS 30 July 2024 1 / 11

Rationality

Rationality: given one’s beliefs about what choices others are making, make the
choice that leads to the most preferred outcome

Common knowledge of rationality: players act rationally, expect each other to all
act rationally, expect all to expect all to act rationally, ...

Game Theory (ECON 319) IDSDS 25 July 2023 2 / 11

Strategic form game

Set of players: N = {1, . . . , n} (finite)

Set of strategies: Si for each player i 2 N (finite)
s = (si )i2N = (s1 , s2 , . . . , sn ) with si 2 Si for all i 2 N is a profile of strategies
(or strategy profile)
S = S1 ⇥ . . . ⇥ Sn is the set of strategy profiles
we denote s i = (si )j2N, j6=i = (s1 , . . . , si 1 , si+1 , . . . , sn )
likewise, we denote S i = S1 ⇥ . . . ⇥ Si 1 ⇥ Si+1 ⇥ . . . ⇥ Sn
so, (si , s 0 i ) = (s10 , . . . , si0 1 , si , si+1
0
, . . . , sn0 )
Set of payo↵ functions: for each player i a function Vi : S ! R assigning a
payo↵ to each strategy profile
if players play according to strategy profile s 2 S, player i 2 N receives the
payo↵ Vi (s)
if player i 2 N plays strategy si 2 Si and beliefs that the other players play
according to the strategy profile s 0 2 S (or s 0 i 2 S i ), then player i expects to
receive a payo↵ of Vi (si , s 0 i )

Game Theory (ECON 319) IDSDS 25 July 2023 3 / 11

Dominant and strictly dominated strategies

A strategy si00 strictly dominates a strategy si0 if the payo↵ from s 00 is strictly
higher than that from s 0 for any strategies chosen by the other players.

More formally, a strategy si00 strictly dominates a strategy si0 if and only if

Vi (si00 , s i ) > Vi (si0 , s i )

for all s i 2 S i.

Game Theory (ECON 319) IDSDS 25 July 2023 4 / 11

Dominant and strictly dominated strategies

A strategy si00 strictly dominates a strategy si0 if the payo↵ from s 00 is strictly
higher than that from s 0 for any strategies chosen by the other players.

More formally, a strategy si00 strictly dominates a strategy si0 if and only if

Vi (si00 , s i ) > Vi (si0 , s i )

for all s i 2 S i.

A strategy si00 is the dominant strategy if it strictly dominates every other strategy.

More formally, a strategy si00 is the dominant strategy if and only if

Vi (si00 , s i ) > Vi (si0 , s i )

for all s i 2S i and all si0 2 Si .

Game Theory (ECON 319) IDSDS 25 July 2023 4 / 11

Dominant and dominated strategies

A rational player will use the dominant strategy if he has one, and will never use a
strategy that is strictly dominated by another strategy.

Game Theory (ECON 319) IDSDS 25 July 2023 5 / 11

Dominant and dominated strategies

A rational player will use the dominant strategy if he has one, and will never use a
strategy that is strictly dominated by another strategy.

A player who believes in the rationality of his rival players believes that they will
play their dominant strategies if they have them, and that none of them will use a
strategy that is strictly dominated.

Game Theory (ECON 319) IDSDS 25 July 2023 5 / 11

Dominant and dominated strategies

A rational player will use the dominant strategy if he has one, and will never use a
strategy that is strictly dominated by another strategy.

A player who believes in the rationality of his rival players believes that they will
play their dominant strategies if they have them, and that none of them will use a
strategy that is strictly dominated.

A player who believes his rival players to believe in his rationality, believes that his
rivals believe him to use his dominant strategy (if he has one), and not to use his
dominated strategies.

Game Theory (ECON 319) IDSDS 25 July 2023 5 / 11

Dominant and dominated strategies

A rational player will use the dominant strategy if he has one, and will never use a
strategy that is strictly dominated by another strategy.

A player who believes in the rationality of his rival players believes that they will
play their dominant strategies if they have them, and that none of them will use a
strategy that is strictly dominated.

A player who believes his rival players to believe in his rationality, believes that his
rivals believe him to use his dominant strategy (if he has one), and not to use his
dominated strategies.

This process continues (at infinitum) if there is common knowledge of rationality

and the procedure of iterative deletion of strictly dominated strategies (IDSDS)
implements this thought process.

Game Theory (ECON 319) IDSDS 25 July 2023 5 / 11

Iterative deletion of strictly dominated strategies

Bert
Left Center Right

Top 13 5 1 6 7 3

Anne Middle 4 1 3 3 6 2

Bottom 0 9 2 8 8 0

Game Theory (ECON 319) IDSDS 25 July 2023 6 / 11

Iterative deletion of strictly dominated strategies

Bert
Left Center Right

Top 13 5 1 6 7 3

Anne Middle 4 1 3 3 6 2

Bottom 0 9 2 8 8 0

1. Center strictly dominates Right for Bert

Game Theory (ECON 319) IDSDS 25 July 2023 6 / 11

Iterative deletion of strictly dominated strategies

Bert
Left Center Right

Top 13 5 1 6 7 3

Anne Middle 4 1 3 3 6 2

Bottom 0 9 2 8 8 0

1. Center strictly dominates Right for Bert

2. Middle strictly dominates Bottom for Anne

Game Theory (ECON 319) IDSDS 25 July 2023 6 / 11

Iterative deletion of strictly dominated strategies

Bert
Left Center Right

Top 13 5 1 6 7 3

Anne Middle 4 1 3 3 6 2

Bottom 0 9 2 8 8 0

1. Center strictly dominates Right for Bert

2. Middle strictly dominates Bottom for Anne
3. Center strictly dominates Left for Bert

Game Theory (ECON 319) IDSDS 25 July 2023 6 / 11

Iterative deletion of strictly dominated strategies

Bert
Left Center Right

Top 13 5 1 6 7 3

Anne Middle 4 1 3 3 6 2

Bottom 0 9 2 8 8 0

1. Center strictly dominates Right for Bert

2. Middle strictly dominates Bottom for Anne
3. Center strictly dominates Left for Bert
4. Middle strictly dominates Top for Anne

Game Theory (ECON 319) IDSDS 25 July 2023 6 / 11

Iterative deletion of strictly dominated strategies

Bert
Left Center Right

Top 13 5 1 6 7 3

Anne Middle 4 1 3 3 6 2

Bottom 0 9 2 8 8 0

1. Center strictly dominates Right for Bert

2. Middle strictly dominates Bottom for Anne
3. Center strictly dominates Left for Bert
4. Middle strictly dominates Top for Anne

In this example one strategy profile remains; if this is the case we call a game
dominance solvable
Game Theory (ECON 319) IDSDS 25 July 2023 6 / 11
Application: first-price auction

Bidder 2 (val = 3)
1 2 3 4 5
3
1 2 1 0 1 0 0 0 1 0 2

1
2 2 0 1 2 0 0 0 1 0 2

1
Bidder 1 3 1 0 1 0 2 0 0 1 0 2
(val = 4)
1
4 0 0 0 0 0 0 0 2 0 2

1
5 1 0 1 0 1 0 1 0 2 1

Game Theory (ECON 319) IDSDS 25 July 2023 7 / 11

Application: first-price auction

Bidder 2 (val = 3)
1 2 3 4 5
3
1 2 1 0 1 0 0 0 1 0 2

1
2 2 0 1 2 0 0 0 1 0 2

1
Bidder 1 3 1 0 1 0 2 0 0 1 0 2
(val = 4)
1
4 0 0 0 0 0 0 0 2 0 2

1
5 1 0 1 0 1 0 1 0 2 1

Game Theory (ECON 319) IDSDS 25 July 2023 7 / 11

Application: first-price auction

Bidder 2 (val = 3)
1 2 3 4 5
3
1 2 1 0 1 0 0 0 1 0 2

1
2 2 0 1 2 0 0 0 1 0 2

1
Bidder 1 3 1 0 1 0 2 0 0 1 0 2
(val = 4)
1
4 0 0 0 0 0 0 0 2 0 2

1
5 1 0 1 0 1 0 1 0 2 1

Game Theory (ECON 319) IDSDS 25 July 2023 7 / 11

Application: first-price auction

Bidder 2 (val = 3)
1 2 3 4 5
3
1 2 1 0 1 0 0 0 1 0 2

1
2 2 0 1 2 0 0 0 1 0 2

1
Bidder 1 3 1 0 1 0 2 0 0 1 0 2
(val = 4)
1
4 0 0 0 0 0 0 0 2 0 2

1
5 1 0 1 0 1 0 1 0 2 1

Game Theory (ECON 319) IDSDS 25 July 2023 7 / 11

Weakly dominated strategies

A strategy si00 weakly dominates a strategy si0 if (1) the payo↵ from s 00 is at least
as high than that from s 0 for any strategies chosen by the other players, and (2)
strictly greater for some strategies of the other players.

More formally, a strategy si00 weakly dominates a strategy si0 if and only if

Vi (si00 , s i ) Vi (si0 , s i )

for all s i 2S i and

Vi (si00 , s i ) > Vi (si0 , s i )

for some s i 2 S i.

Game Theory (ECON 319) IDSDS 25 July 2023 8 / 11

Application: first-price auction

Bidder 2 (val = 3)
1 2 3 4 5
3
1 2 1 0 1 0 0 0 1 0 2

1
2 2 0 1 2 0 0 0 1 0 2

1
Bidder 1 3 1 0 1 0 2 0 0 1 0 2
(val = 4)
1
4 0 0 0 0 0 0 0 2 0 2

1
5 1 0 1 0 1 0 1 0 2 1

Game Theory (ECON 319) IDSDS 25 July 2023 9 / 11

Application: first-price auction

Bidder 2 (val = 3)
1 2 3 4 5
3
1 2 1 0 1 0 0 0 1 0 2

1
2 2 0 1 2 0 0 0 1 0 2

1
Bidder 1 3 1 0 1 0 2 0 0 1 0 2
(val = 4)
1
4 0 0 0 0 0 0 0 2 0 2

1
5 1 0 1 0 1 0 1 0 2 1

Game Theory (ECON 319) IDSDS 25 July 2023 9 / 11

Application: first-price auction

Bidder 2 (val = 3)
1 2 3 4 5
3
1 2 1 0 1 0 0 0 1 0 2

1
2 2 0 1 2 0 0 0 1 0 2

1
Bidder 1 3 1 0 1 0 2 0 0 1 0 2
(val = 4)
1
4 0 0 0 0 0 0 0 2 0 2

1
5 1 0 1 0 1 0 1 0 2 1

Game Theory (ECON 319) IDSDS 25 July 2023 9 / 11

Weakly dominated strategies

Watch out with eliminating weakly dominated strategies!

1 1 0 0 1 1 0 0

1 1 2 1 1 1 2 1

0 0 2 1 0 0 2 1

Game Theory (ECON 319) IDSDS 25 July 2023 10 / 11

Weakly dominated strategies

Watch out with eliminating weakly dominated strategies!

1 1 0 0 1 1 0 0

1 1 2 1 1 1 2 1

0 0 2 1 0 0 2 1

Game Theory (ECON 319) IDSDS 25 July 2023 10 / 11

Weakly dominated strategies

Watch out with eliminating weakly dominated strategies!

1 1 0 0 1 1 0 0

1 1 2 1 1 1 2 1

0 0 2 1 0 0 2 1

Game Theory (ECON 319) IDSDS 25 July 2023 10 / 11

Where to locate my pub?

A B C D E F G

A B C D E F G

A 300 300 50 550 100 500 150 450 200 400 250 350 300 300

B 550 50 300 300 150 450 200 400 250 350 300 300 350 250

C 500 100 450 150 300 300 250 350 300 300 350 250 400 200

D 450 150 400 200 350 250 300 300 350 250 400 200 450 150

E 400 200 350 250 300 300 250 350 300 300 450 150 500 100

F 350 250 300 300 250 350 200 400 150 450 300 300 550 50

G 300 300 250 350 200 400 150 450 100 500 50 550 300 300

Game Theory (ECON 319) IDSDS 25 July 2023 11 / 11

Where to locate my pub?

A B C D E F G

A B C D E F G

A 300 300 50 550 100 500 150 450 200 400 250 350 300 300

B 550 50 300 300 150 450 200 400 250 350 300 300 350 250

C 500 100 450 150 300 300 250 350 300 300 350 250 400 200

D 450 150 400 200 350 250 300 300 350 250 400 200 450 150

E 400 200 350 250 300 300 250 350 300 300 450 150 500 100

F 350 250 300 300 250 350 200 400 150 450 300 300 550 50

G 300 300 250 350 200 400 150 450 100 500 50 550 300 300

Game Theory (ECON 319) IDSDS 25 July 2023 11 / 11

Where to locate my pub?

A B C D E F G

A B C D E F G

A 300 300 50 550 100 500 150 450 200 400 250 350 300 300

B 550 50 300 300 150 450 200 400 250 350 300 300 350 250

C 500 100 450 150 300 300 250 350 300 300 350 250 400 200

D 450 150 400 200 350 250 300 300 350 250 400 200 450 150

E 400 200 350 250 300 300 250 350 300 300 450 150 500 100

F 350 250 300 300 250 350 200 400 150 450 300 300 550 50

G 300 300 250 350 200 400 150 450 100 500 50 550 300 300

Game Theory (ECON 319) IDSDS 25 July 2023 11 / 11

Where to locate my pub?

A B C D E F G

A B C D E F G

A 300 300 50 550 100 500 150 450 200 400 250 350 300 300

B 550 50 300 300 150 450 200 400 250 350 300 300 350 250

C 500 100 450 150 300 300 250 350 300 300 350 250 400 200

D 450 150 400 200 350 250 300 300 350 250 400 200 450 150

E 400 200 350 250 300 300 250 350 300 300 450 150 500 100

F 350 250 300 300 250 350 200 400 150 450 300 300 550 50

G 300 300 250 350 200 400 150 450 100 500 50 550 300 300

Game Theory (ECON 319) IDSDS 25 July 2023 11 / 11