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[parent] example of Nash equilibrium (Example)

Consider the first two games given as examples of normal form games.

In Prisoner's Dilemma the only Nash equilibrium is for both players to play $ D$: it's apparent that, no matter what player $ 1$ plays, player $ 2$ does better playing $ D$, and vice-versa for $ 1$.

Battle of the Sexes has three Nash equilibria. Both $ (O,O)$ and $ (F,F)$ are Nash equilibria, since it should be clear that if player $ 2$ expects player $ 1$ to play $ O$, player $ 2$ does best by playing $ O$, and vice-versa, while the same situation holds if player $ 2$ expects player $ 1$ to play $ F$. The third is a mixed equilibrium; player $ 1$ plays $ O$ with $ \frac{2}{3}$ probability and player $ 2$ plays $ O$ with $ \frac{1}{3}$ probability. We confirm that these are equilibria by testing the first derivatives (if 0 then the strategy is either maximal or minimal). Technically we also need to check the second derivative to make sure that it is a maximum, but with simple games this is not really necessary.

Let player $ 1$ play $ O$ with probability $ p$ and player $ 2$ plays $ O$ with probability $ q$.

$\displaystyle u_1(p,q)=2pq+(1-p)(1-q)=2pq-p-q+pq=3pq-p-q $
$\displaystyle u_2(p,q)=pq+2(1-p)(1-q)=3pq-2p-2q $

$\displaystyle \frac{\partial u_1(p,q)}{\partial p}=3q-1 $
$\displaystyle \frac{\partial u_2(p,q)}{\partial q}=3p-2 $

And indeed the derivatives are 0 at $ p=\frac{2}{3}$ and $ q=\frac{1}{3}$.



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Cross-references: derivatives, necessary, simple, second derivative, minimal, strategy, first derivatives, clear, battle of the sexes, players, Nash equilibrium, dilemma, examples of normal form games, games

This is version 3 of example of Nash equilibrium, born on 2002-07-28, modified 2006-01-06.
Object id is 3222, canonical name is ExampleOfNashEquilibrium.
Accessed 6721 times total.

Classification:
AMS MSC91A99 (Game theory, economics, social and behavioral sciences :: Game theory :: Miscellaneous)

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