Best Response Curves and Nash Equilibria - 3pp

14/03/2012
Week 3:
Best responses and Nash equilibria
(complementary notes)
Nash Equilibrium
InanyNashequilibrium(NE)eachplayer
choosesabestresponsetothechoices
madebyalloftheotherplayers.
AgamemayhavemorethanoneNE.
Nash Equilibrium
Howcanwelocateeveryoneofagames
Nashequilibria?
IfthereismorethanoneNE,canweargue
thatoneismorelikelytooccurthan
another?
14/03/2012
Best Responses
Thinkofa22game;i.e., agamewithtwo
players,AandB,eachwithtwoactions.
AcanchoosebetweenactionsaA1 andaA2.
Best Responses
BcanchoosebetweenactionsaB1 andaB2.
Thereare4possibleactionpairs;
(aA1,aB1),(aA1,aB2),(aA2,aB1),(aA2,aB2).
Eachactionpairwillusuallycausedifferent
payoffsfortheplayers.
Best Responses
SupposethatAsandBspayoffswhenthe
chosenactionsareaA1 andaB1 are
UA(aA1,aB1)=6andUB(aA1,aB1)=4.
Similarly,supposethat
UA(aA1,aB2)=3andUB(aA1,aB2)=5
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Best Responses
UA(aA1,aB1)=6 andUB(aA1,aB1)=4
IfBchoosesactionaB1 thenAsbest
responseisactionaA1 (because6>4).
Best Responses
UA(aA2,aB2)=5 andUB(aA2,aB2)=7.
IfBchoosesactionaB2 thenAsbest
responseisactionaA2 (because5>3).
Best Responses
IfBchoosesaB1 thenAchoosesaA1.
IfBchoosesaB2 thenAchoosesaA2.
Asbestresponsecurve istherefore
+
aA2
As best
response
aA1
aB1
aB2
Bs action
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Best Responses
IfAchoosesactionaA1 thenBsbest
responseisactionaB2 (because5>4).
Best Responses
IfAchoosesactionaA2 thenBsbest
responseisactionaB2 (because7>3).
Best Responses
IfAchoosesaA1 thenBchoosesaB2.
Bsbestresponsecurve istherefore
aA2
As
action
aA1
aB1
aB2
Bs best response
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Best Responses
Bsbestresponsecurve istherefore
Notice that aB2 is a
strictly dominant
action for B.
aA2
As
action
aA1
aB1
aB2
Bs best response
Best Responses & Nash Equilibria

Howcantheplayersbestresponsecurvesbe
usedtolocatethegamesNashequilibria?
Putonecurveontopoftheother.
As response
As choice
aA2
aA2
aA1
aA1
aB1
aB2
Bs choice
+
+
aB1
aB2
Bs response

Howcantheplayersbestresponsecurvesbe
usedtolocatethegamesNashequilibria?
Putonecurveontopoftheother.
As response
+
aA2
aA1
aB1
aB2
IsthereaNashequilibrium?
Yes,(aA2,aB2).Why?
aA2 isabestresponsetoaB2.
aB2 isabestresponsetoaA2.
Bs response
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Player B
aB1
aB2
Hereisthestrategic
formofthegame.
aA1
Player A
6,4
3,5
aA2
4,3
5,7
Istherea2nd Nash
eqm.?No,because
aB2 isastrictly
dominant action
forPlayerB.
aA2 istheonlybestresponsetoaB2.
aB2 istheonlybestresponsetoaA2.

Player B
aB1
aB2
aA1
Player A
6,4
3,5
aA2
4,3
5,7
A1 istheprob.A
choosesactionaA1.
B1 istheprob.B
choosesactionaB1.
Nowallowbothplayerstorandomize(i.e., mix)
overtheiractions.

Player B
aB1
aB2
aA1
Player A
6,4
aA2
4,3
3,5
5,7
A1 istheprob.A
choosesactionaA1.
B1 istheprob.B
choosesactionaB1.
GivenB1,what
valueofA1 isbest
forA?
14/03/2012

Player B
aB1
aB2
aA1
Player A
6,4
aA2
4,3
3,5
5,7
A1 istheprob.A
choosesactionaA1.
B1 istheprob.B
choosesactionaB1.
GivenB1,what
valueofA1 isbest
forA?
EVA(aA1)=6B1 +3(1 B1)=3+3B1.

Player B
aB1
aB2
aA1
Player A
6,4
aA2
4,3
3,5
5,7
A1 istheprob.A
choosesactionaA1.
B1 istheprob.B
choosesactionaB1.
GivenB1,what
valueofA1 isbest
forA?
EVA(aA1)=6B1 +3(1 B1)=3+3B1.

EVA(aA2)=4B1 +5(1 B1)=5 B1.

A1 istheprob.AchoosesactionaA1.
B1 istheprob.BchoosesactionaB1.
GivenB1,whatvalueofA1 isbestforA?
EVA(aA1)=3+3B1.
EVA(aA2)=5 B1.
>
3+3B1 >
5 B1 asB1
=
=
< ??
<
14/03/2012

EVA(aA1)=3+3B1.
EVA(aA2)=5 B1.
3+3B1 >5 B1 asB1>.

EVA(aA1)=3+3B1.
EVA(aA2)=5 B1.
3+3B1 >5 B1 asB1>.
Asbestresponseis:
aA1 ifB1 >
aA2 ifB1 <
aA1 oraA2 ifB1 =

EVA(aA1)=3+3B1.
EVA(aA2)=5 B1.
3+3B1 >5 B1 asB1> .
Asbestresponseis:
aA1 (i.e. A1 =1)ifB1 >
aA2 (i.e. A1 =0)ifB1 <
aA1 oraA2 (i.e. 0 A1 1)ifB1 =
14/03/2012

As best response is: aA1 (i.e. A1 = 1) if B1 >
aA2 (i.e. A1 = 0) if B1 <
aA1 or aA2 (i.e. 0 A1 1) if
B1 =
As best response
A1
1
B1

aA2 (i.e. A1 = 0) if B1 <
B1 =
As best response
A
1
1
B1

aA2 (i.e. A1 = 0) if B1 <
B1 =
As best response
A1
1
B1
14/03/2012

aA2 (i.e. A1 = 0) if B1 <
B1 =
As best response
A1
1
ThisisAsbestresponse
curvewhenplayersare
allowedtomixovertheir
actions.
0
B1

Player B
aB1
aB2
aA1
Player A
6,4
aA2
4,3
3,5
5,7
A1 istheprob.A
choosesactionaA1.
B1 istheprob.B
choosesactionaB1.
GivenA1,what
valueofB1isbest
forB?

Player B
aB1
aB2
aA1
Player A
6,4
aA2
4,3
3,5
5,7
A1 istheprob.A
choosesactionaA1.
B1 istheprob.B
choosesactionaB1.
GivenA1,what
valueofB1isbest
forB?
EVB(aB1)=4A1 +3(1 A1)=3+A1.
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14/03/2012

Player B
aB1
aB2
aA1
Player A
6,4
aA2
4,3
3,5
5,7
A1 istheprob.A
choosesactionaA1.
B1 istheprob.B
choosesactionaB1.
GivenA1,what
valueofB1isbest
forB?
EVB(aB1)=4A1 +3(1 A1)=3+A1.

EVB(aB2)=5A1 +7(1 A1)=7 2A1.

GivenA1,whatvalueofB1 isbestforB?
EVB(aB1)=3+A1.
EVB(aB2)=7 2A1.
>
3+A1 >
7 2A1 asA1
??
=
=
<
<

EVB(aB1)=3+A1.
EVB(aB2)=7 2A1.
3+A1<7 2A1 forall0 A1 1.
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14/03/2012

EVB(aB1)=3+A1.
EVB(aB2)=7 2A1.
3+A1<7 2A1 forall0 A1 1.
Bsbestresponseis:
aB2 always(i.e. B1 =0always).

Bs best response is aB2 always (i.e. B1 = 0 always).
A1
ThisisBsbestresponse
curvewhenplayersare
allowedtomixovertheir
actions.
0
B1
Bs best response
A
As best response
A1
A1
B1
B1
Bs best response
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14/03/2012

Is there a Nash equilibrium?
B
A
As best response
A1
A1
B1
B1
Bs best response

B
A
As best response
A1
A1
B1
B1
Bs best response

As best response
A1
1
B1
Bs best response
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14/03/2012

Is there a Nash equilibrium? Yes. Just one.
(A1,B1)=(0,0);
i.e. AchoosesaA2 only
&BchoosesaB2 only.
As best response
A1
1
B1
Bs best response

Player B
aB1
aB2
aA1
Player A
6,4
3,5
aA2
4,3
5,7
Lets change the game.

Player B
aB1
aB2
aA1
Player A
6,4
3,1
3,5
aA2
4,3
5,7
Here is a new
22 game.
14
14/03/2012

Player B
aB1
aB2
aA1
Player A
6,4
3,1
aA2
4,3
5,7
Hereisanew
22game.Again
letA1 betheprob.
thatAchoosesaA1
andletB1 bethe
prob.thatBchooses
aB1.WhataretheNE
ofthisgame?
NoticethatPlayerBnolongerhasastrictlydominantaction.

Player B
aB2
1
aB
aA1
Player A
6,4
3,1
aA2
4,3
5,7
A1 istheprob.thatA
choosesaA1.
B1 istheprob.thatB
choosesaB1.
EVA(aA1)=??
EVA(aA2)=??

Player B
aB1
aB2
aA1
Player A
6,4
3,1
aA2
4,3
5,7
A1 istheprob.thatA
choosesaA1.
B1 istheprob.thatB
choosesaB1.
EVA(aA1)=6B1 +3(1 B1)=3+3B1.

EVA(aA2)=??
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14/03/2012

Player B
aB1
aB2
aA1
Player A
6,4
3,1
aA2
4,3
5,7
A1 istheprob.thatA
choosesaA1.
B1 istheprob.thatB
choosesaB1.
EVA(aA1)=6B1 +3(1 B1)=3+3B1.

EVA(aA2)=4B1 +5(1 B1)=5 B1.

Player B
aB2
1
aB
aA1
Player A
6,4
3,1
aA2
4,3
5,7
A1 istheprob.thatA
choosesaA1.
B1 istheprob.thatB
choosesaB1.
EVA(aA1)=6B1 +3(1 B1)=3+3B1.

EVA(aA2)=4B1 +5(1 B1)=5 B1.
>
3+3B1
= 5 B1 asB1 >
= .
<
<

EVA(aA1)=6B1 +3(1 B1)=3+3B1.
EVA(aA2)=4B1 +5(1 B1)=5 B1.
>
3+3B1
5 B1 asB1 >
.
=
=
<
<
As best response
A1
1
B1
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14/03/2012

EVA(aA1)=6B1 +3(1 B1)=3+3B1.
EVA(aA2)=4B1 +5(1 B1)=5 B1.
>
3+3B1
5 B1 asB1 >
.
=
=
<
<
As best response
A1
1
B1

Player B
aB2
1
aB
aA1
Player A
6,4
3,1
aA2
4,3
5,7
A1 istheprob.thatA
choosesaA1.
B1 istheprob.thatB
choosesaB1.
EVB(aB1)=??
EVB(aB2)=??

Player B
aB1
aB2
aA1
Player A
6,4
3,1
aA2
4,3
5,7
A1 istheprob.thatA
choosesaA1.
B1 istheprob.thatB
choosesaB1.
EVB(aB1)=4A1 +3(1 A1)=3+A1.

EVB(aB2)=??
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14/03/2012

Player B
aB1
aB2
aA1
Player A
6,4
3,1
aA2
4,3
5,7
A1 istheprob.thatA
choosesaA1.
B1 istheprob.thatB
choosesaB1.
EVB(aB1)=4A1 +3(1 A1)=4+A1.

EVB(aB2)=A1 +7(1 A1)=7 6A1.

Player B
aB2
1
A1 istheprob.thatA
choosesaA1.
B1 istheprob.thatB
choosesaB1.
aB
aA1
Player A
6,4
3,1
aA2
4,3
5,7
EVB(aB1)=4A1 +3(1 A1)=3+A1.

EVB(aB2)=A1 +7(1 A1)=7 6A1.
>
>
3+A1
= 7 6A1 asA1 = 4/ 7
<
<

EVB(aB1)=4A1 +3(1 A1)=3+A1.
EVB(aB2)=A1 +7(1 A1)=7 6A1.
>
>
3+A1
= 7 6A1 asA1 = 4/ 7
<
<
A1
4/
7
B1
Bs best response
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14/03/2012

EVB(aB1)=4A1 +3(1 A1)=3+A1.
EVB(aB2)=A1 +7(1 A1)=7 6A1.
>
>
3+A1
= 7 6A1 asA1 = 4/ 7
<
<
A1
4/
7
B1
Bs best response
A
As best response
A1
A1
4/
7
B1
B1
Bs best response

B
A
As best response
A1
A1
4/
7
B1
B1
Bs best response
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14/03/2012

B
A
As best response
A1
A1
4/
7
B1
B1
Bs best response

As best response
A1
1
4/
7
B1
Bs best response

Is there a Nash equilibrium? Yes. 3 of them.
As best response
A1
1
4/
7
B1
Bs best response
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14/03/2012

(A1, B1) = (0,0)
As best response
A1
1
4/
7
B1
Bs best response

(A1, B1) = (0,0)
(A1, B1) = (1,1)
As best response
A1
1
4/
7
B1
Bs best response

(A1, B1) = (0,0)
(A1, B1) = (1,1)
(A1, B1) = (4/7 , )
As best response
A1
1
4/
7
B1
Bs best response
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14/03/2012
Two more examples

Gamesofcoordination
Gamesofcoexistence
Coordination Games
Simultaneousplaygamesinwhichthe
payoffstotheplayersarelargestwhen
theycoordinatetheiractions.Famous
examplesare:
TheBattleoftheSexesGame
ThePrisonersDilemmaGame
TheChickenGame
Coordination Games;
The Battle of the Sexes
Sissypreferswatchingballettowatching
ultimatefighting.
Jockpreferswatchingultimatefightingto
watchingballet.
Bothpreferwatchingsomethingtogether
tobeingapart.
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14/03/2012
Coordination Games;
Jock
B
B
UF
8,4
1,2
Sissy
UF
2,1
4,8
SB istheprob.that
Sissychoosesballet.
JB istheprob.that
Jockchoosesballet.
Whataretheplayers
bestresponse
functions?
Coordination Games;
Jock
B
B
UF
8,4
1,2
Sissy
UF
2,1
4,8
SB istheprob.that
Sissychoosesballet.
JB istheprob.that
Jockchoosesballet.
Whataretheplayers
bestresponse
functions?
EVS(B)=8JB +1(1 JB)=1+7JB.

EVS(UF)=2JB +4(1 JB)=4 2JB.
J
J > 1./
>
1+7JB
= 4 2 B as B =
< 3
<
Coordination Games;
Jock
B
B
UF
8,4
1,2
2,1
4,8
Sissy
UF
EVS(B)=8JB +1(1 JB)=1+7JB.

EVS(UF)=2JB +4(1 JB)=4 2JB.
J
J >
>
1+7JB
= 4 2 B as B = 1./3
<
<
SB istheprob.that
Sissychoosesballet.
JB istheprob.that
Jockchoosesballet.
SB
Sissy
0
0
1/3
1 JB
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14/03/2012
Coordination Games;
Jock
B
B
SB istheprob.that
Sissychoosesballet.
JB istheprob.that
Jockchoosesballet.
UF
8,4
1,2
2,1
4,8
JB
Sissy
UF
Jock
EVJ(B)=4SB +1(1 SB)=1+3SB.

EVJ(UF)=2SB +8(1 SB)=8 6SB.
>
1+3SB
8 6SB asSB >
7/.
=
=
< 9
<
0
0
7/9 1 SB
Coordination Games;
The games NE are ??
SB
SB
Sissy
Jock
1
7/9
0
0
1/3
1 JB
0
0
1 JB
Coordination Games;
Sissy
SB
1
7/9
0
0
The games NE are: (JB, SB) = (0, 0); i.e., (UF, UF)
(JB, SB) = (1, 1); i.e., (B, B)
(JB, SB) = (1/3, 7/9); i.e., both
watch the ballet with prob. 7/27, both watch the ultimate
fighting with prob. 4/27, Sissy watches UF and Jock
watches ballet with prob. 2/27 and
with prob. 14/27 they watch their
preferred event alone.
1/3
Jock
1 JB
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14/03/2012
Coexistence Games
Simultaneousplaygamesthatcanbeused
tomodelhowmembersofaspeciesact
towardseachother.
Animportantexampleisthehawkdove
game.
Coexistence Games;
The Hawk-Dove Game
Hawkmeansbeaggressive.
Dovemeansdontbeaggressive.
Twobearscometoafishingspot.Either
bearcanfighttheothertotrytodriveit
awaytogetmorefishforitselfbutsuffer
battleinjuries,oritcantoleratethe
presenceoftheother,sharethefishing,
andavoidinjury.
Coexistence Games;
The Hawk-Dove Game
Bear 2
Hawk
Dove
Hawk
Bear 1
Dove
-5,-5
8,0
0,8
4,4
Are there NE in pure strategies?
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14/03/2012
Coexistence Games;
The Hawk-Dove Game
Bear 2
Hawk
Dove
Hawk
Bear 1
Dove
-5,-5
8,0
0,8
4,4
Are there NE in pure strategies?

Yes (Hawk, Dove) and (Dove, Hawk).
Notice that purely peaceful coexistence is not a NE.
Coexistence Games;
The Hawk-Dove Game
Bear 2
Hawk
Dove
Hawk
Bear 1
Dove
-5,-5
8,0
0,8
4,4
Is there a NE in mixed strategies?
Coexistence Games;
The Hawk-Dove Game
Bear 2
Hawk
Dove
Hawk
Bear 1
Dove
-5,-5
8,0
0,8
4,4
1H is the prob. that

1 chooses Hawk.
2 chooses Hawk.
What are the players
best-response
functions?
Is there a NE in mixed strategies?
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14/03/2012
Coexistence Games;
The Hawk-Dove Game
Bear 2
Hawk
Dove
Hawk
Bear 1
Dove
-5,-5
8,0
0,8
4,4

1 chooses Hawk.
2 chooses Hawk.
best-response
functions?
EV1(H) = -52H + 8(1 - 2H) = 8 - 132H.

EV1(D) = 4 - 42H.
Coexistence Games;
The Hawk-Dove Game
Bear 2
Hawk
Dove
Hawk
Bear 1
Dove
EV1(H) =
EV1(D) =
8 - 132H
-5,-5
8,0
0,8
4,4

1 chooses Hawk.
2 chooses Hawk.
best-response
functions?
-52H + 8(1 - 2H) = 8 - 132H.

4 - 42H.
>
= 4 - 42H as 2H <
= 4/9.
<
>
Coexistence Games;
The Hawk-Dove Game
Bear 2
Hawk
Dove
Hawk
Bear 1
Dove
EV1(H) =
EV1(D) =
8 - 132H
-5,-5
8,0
0,8
4,4
-52H + 8(1 - 2H) = 8 - 132H.

4 - 42H.
>
= 4 - 42H as 2H <
= 4/9.
<
>

1 chooses Hawk.
2 chooses Hawk.
1H
Bear 1
1
0
0
4/9
1 2H
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14/03/2012
Coexistence Games;
The Hawk-Dove Game
1H
Bear 1
2H Bear 2
0
0
4/9
1 2H
0
0
4/9
1 1H
Coexistence Games;
The Hawk-Dove Game
1H
Bear 1
2H Bear 2
4/9
0
0
4/9
1 2H
0
0
4/9
1 1H
Coexistence Games;
The Hawk-Dove Game
1H
Bear 1
1H Bear 2
4/9
0
0
4/9
1 2H
0
0
1 2H
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14/03/2012
Coexistence Games;
The Hawk-Dove Game
The game has a NE in mixed-strategies in which
each bear plays Hawk with probability 4/9.
1H
1
0
0
4/9
1 2H
29

Best Response Curves and Nash Equilibria - 3pp

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14/03/2012

Best Responses & Nash Equilibria

Best Responses & Nash Equilibria

Best Responses & Nash Equilibria

Best Responses & Nash Equilibria

Best Responses & Nash Equilibria

Best Responses & Nash Equilibria

EVA(aA1)=6B1 +3(1 B1)=3+3B1.

Best Responses & Nash Equilibria

EVA(aA1)=6B1 +3(1 B1)=3+3B1.

Best Responses & Nash Equilibria

Best Responses & Nash Equilibria

Best Responses & Nash Equilibria

Best Responses & Nash Equilibria

Best Responses & Nash Equilibria

Best Responses & Nash Equilibria

Best Responses & Nash Equilibria

Best Responses & Nash Equilibria

Best Responses & Nash Equilibria

Best Responses & Nash Equilibria

EVB(aB1)=4A1 +3(1 A1)=3+A1.

Best Responses & Nash Equilibria

EVB(aB1)=4A1 +3(1 A1)=3+A1.

Best Responses & Nash Equilibria

Best Responses & Nash Equilibria

Best Responses & Nash Equilibria

Best Responses & Nash Equilibria

Best Responses & Nash Equilibria

Best Responses & Nash Equilibria

Best Responses & Nash Equilibria

Best Responses & Nash Equilibria

Best Responses & Nash Equilibria

Best Responses & Nash Equilibria

Lets change the game.

Best Responses & Nash Equilibria

Best Responses & Nash Equilibria

Best Responses & Nash Equilibria

Best Responses & Nash Equilibria

EVA(aA1)=6B1 +3(1 B1)=3+3B1.

Best Responses & Nash Equilibria

EVA(aA1)=6B1 +3(1 B1)=3+3B1.

Best Responses & Nash Equilibria

EVA(aA1)=6B1 +3(1 B1)=3+3B1.

Best Responses & Nash Equilibria

Best Responses & Nash Equilibria

Best Responses & Nash Equilibria

Best Responses & Nash Equilibria

EVB(aB1)=4A1 +3(1 A1)=3+A1.

Best Responses & Nash Equilibria

EVB(aB1)=4A1 +3(1 A1)=4+A1.

Best Responses & Nash Equilibria

EVB(aB1)=4A1 +3(1 A1)=3+A1.

Best Responses & Nash Equilibria

Best Responses & Nash Equilibria

Best Responses & Nash Equilibria

Best Responses & Nash Equilibria

Best Responses & Nash Equilibria

Best Responses & Nash Equilibria

Best Responses & Nash Equilibria

Best Responses & Nash Equilibria

Best Responses & Nash Equilibria

Best Responses & Nash Equilibria

Two more examples