HE 3002 Game Theory and Applications to Social Sciences

Assignment 1
(Due on September 16 Tuesday, at the beginning of class. No late homework is
accepted.)
1. Find out all the Nash equilibria of the Stag Hunt game (Jean-Jacques
Rousseau, 1755)
Hunter 2
Stag Hare
Stag 2; 2
0; 1
Hunter 1
Hare 1; 0
1; 1
2. The government is going to contract a public project to a single developer.
There are n developers who are interested in the project. For any developer i,
its probability of winning the project is given by
ai
;
n
P
aj

j=1

i.e., the ratio of developer is spending on the proposal, ai , over the sum of
n
P
the spendings of all the developers,
aj . The project is worth M (net of
j=1

construction costs) to the winning developer, and is worth zero to the failing
developer. Each developer simultaneously and independently chooses an amount
to spend on its proposal. Find a symmetric (pure strategy) Nash equilibrium.
(Note: A symmetric equilibrium is an equilibrium in which each player chooses
the same strategy.)
3. Assume that Apple (with product iPhone) and Samsung (with product
Galaxy) compete in the smart-phone market by simultaneously setting their
prices. The demand for iPhone is
qa = 400

2pa + ps ;

and the demand for Galaxy is

qs = 400

2ps + pa ;

where pa is the price of iPhone, ps is the price of Samsung Galaxy, qa is market

demand of iPhone and qs is market demand of Galaxy. Notice that the demand
for each product decreases with its own price but increases with its competitors
price. Assume that both rms have a constant cost c = 100 for producing each
unit of smart phone. Find the (pure strategy) Nash equilibrium of this game.
4. Suppose players L and F are playing a game where player L has two pure
strategies: S and C and player F has two pure strategies: s and c. You can
1

restrict attention to pure strategies in this problem. The payo matrix is as

follows:
Player F
s
c
S 5; 2 3; 1
Player L
C 6; 3 4; 4
(i) Find all the Nash equilibria if players choose actions simultaneously.
(ii) Now suppose the game is played sequentially where player L moves rst.
Player F observes player Ls action and then chooses his action. Draw the
extensive form of this game. Find all the subgame perfect Nash equilibria.
5. Read the Appendix below regarding judicial procedures. Find all the
pure strategy subgame perfect Nash equilibria to the judicial game between
three judges for the procedure of status quo.
Appendix: Judicial Procedures
There are three alternative procedures to determine the outcome of a criminal court case. Each has its merits, and you might want to choose among them
based on some underlying principles.
(1). Status Quo: First determine innocence or guilt, then if guilty consider
the appropriate punishment (death penalty or life sentence).
(2). Roman Tradition: After hearing the evidence, start with the most
serious punishment and work down the list. First decide if the death penalty
should be imposed for this case. If not, then decide whether a life sentence is
justied. If, after proceeding down the list, no sentence is imposed, then the
defendant is acquitted.
(3). Mandatory Sentencing: First specify the sentence for the crime. Then
determine whether the defendant should be convicted.
The dierence between these systems is only in terms of agenda: what gets
decided rst. We consider a case with only three possible outcomes: the death
penalty, life imprisonment, and acquittal.
The defendants fate rests in the hands of three judges. Their decision is
determined by a majority vote. This is particularly useful since the three judges
are deeply divided.
Judge A holds that the defendant is guilty and should be given the maximum possible sentence. This judge seeks to impose the death penalty. Life
imprisonment is her second choice and acquittal is her worst outcome.
Judge B also believes that the defendant is guilty. However, this judge unyieldingly opposes the death penalty. Her most preferred outcome is life imprisonment. The precedent of imposing a death sentence is su ciently troublesome
that she would prefer to see the defendant acquitted rather than executed by
the state.
Judge C holds that the defendant is innocent, and thus seeks acquittal. She
is on the other side of the fence from the second judge, believing that life in

prison is a fate worse than death. Consequently, if acquittal fails, her secondbest outcome would be to see the defendant sentenced to death. Life in prison
would be the worst outcome.
Best
Middle
Worst

Judge As ranking
Death Sentence
Life in Prison
Acquittal

Judge Bs ranking
Life in Prison
Acquittal
Death Sentence

Judge Cs ranking
Acquittal
Death Sentence
Life in Prison