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Normal-Form Games
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Normal-Form Games
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Now ยท ๐ฏ Learning Objectives
Normal-Form Games
๐ฏ Learning Objectives
- Represent any static game of complete information using a normal-form payoff matrix
- Identify players, strategies, and payoffs from a game description
- Apply common knowledge of rationality assumptions
- Analyze classic games: Prisoner's Dilemma, Battle of the Sexes, Coordination, Chicken
- Distinguish between strict and weak dominance
๐ Prerequisites
- Basic algebra and set notation from high school mathematics
- From BSCS3003-AI Search: Minimax algorithm for zero-sum games provides intuition for strategic thinking
1.1 What Is a Game?
A game involves:
- Two or more players (decision-makers)
- Each player chooses from a set of strategies Siโ
- The payoff for each player depends on the combination of strategies chosen
๐ Key Insight: Your payoff depends not only on your own choice, but on others' choices too.
Formal Definition
A normal-form game is โจN,{Siโ}iโNโ,{uiโ}iโNโโฉ where:
- N={1,2,โฆ,n} โ set of players
- Siโ โ strategy set for player i
- uiโ:S1โรโฏรSnโโR โ payoff function For two-player games, we use a payoff matrix:
The first entry is Player 1's (row) payoff; the second is Player 2's (column) payoff.
1.2 Rationality Assumptions
| Assumption | Meaning |
|---|---|
| Rationality | Players maximise their own payoff given beliefs |
| Common Knowledge of Rationality (CKR) | Everyone knows everyone is rational, knows they know, ad infinitum |
| Complete Information | All players know the game structure (players, strategies, payoffs) |
| Simultaneous Moves | No one observes another's choice before deciding |
1.3 Classic Games
Prisoner's Dilemma
SilentConfessโSilent(โ1,โ1)(0,โ10)โConfess(โ10,0)(โ5,โ5)โโ- Confess strictly dominates Silent for both
- Outcome (Confess,Confess) is worse for both than (Silent,Silent)
- Paradox: Individual rationality โ collective irrationality
Battle of the Sexes
BalletFootballโBallet(2,1)(0,0)โFootball(0,0)(1,2)โโ- Two Nash equilibria: (Ballet, Ballet) and (Football, Football)
- Coordination problem with distributional conflict
Chicken (Hawk-Dove)
SwerveStayโSwerve(0,0)(1,โ1)โStay(โ1,1)(โ5,โ5)โโ- Two asymmetric equilibria: (Swerve, Stay) and (Stay, Swerve)
- Models brinkmanship
1.4 Dominance
Strict Dominance
siโ strictly dominates siโฒโ if:
Weak Dominance
siโ weakly dominates siโฒโ if:
And strictly for at least one sโiโ.
Iterated Elimination of Strictly Dominated Strategies (IESDS)
(Diagram)
1.5 Best Response
siโ is a best response to sโiโ if:
The best response correspondence BRiโ(sโiโ) collects all best responses.
๐ Formula Summary
| Concept | Definition |
|---|---|
| Normal-form game | โจN,{Siโ},{uiโ}โฉ |
| Strict dominance | uiโ(siโ,sโiโ)>uiโ(siโฒโ,sโiโ)ย โsโiโ |
| Weak dominance | uiโ(siโ,sโiโ)โฅuiโ(siโฒโ,sโiโ)ย โsโiโ , strict for some |
| Best response | BRiโ(sโiโ)=argmaxsiโโuiโ(siโ,sโiโ) |
โ Practice Questions
Q1: Two firms compete on price (High/Low). Profits:
Does either firm have a strictly dominant strategy?
XYZโA(5,3)(3,1)(2,0)โB(4,2)(4,4)(1,5)โC(3,1)(5,2)(4,3)โโSolutionFor Firm 1: If P2 plays H, u1โ(L)=6>u1โ(H)=4. If P2 plays L, u1โ(L)=2>u1โ(H)=1. L strictly dominates H. By symmetry, L also dominates for Firm 2. This is a Prisoner's Dilemma. Q2: Find weakly dominated strategies:
UDโL(10,2)(5,6)โR(3,4)(8,1)โโSolutionZ is strictly dominated by Y (3>2,4>1,5>4). C is strictly dominated by B (2>1,4>2,5>3). After eliminating Z and C, no further dominated strategies remain. Q3: Find all best responses:
BR1โ(L)={U}, BR1โ(R)={D}, BR2โ(U)={R}, BR2โ(D)={L}. No pure-strategy Nash equilibrium exists.