Summary ECO2007 Module 2.2

MODULE 2.2: Simultaneous-Move games




Dominance

Prisoner’ Dilemma


 Two students (Connor and Michaela) get arrested and are interrogated separately
 Two-person simultaneous move game, where each separately make the choice to
confess to or deny the crime.

, Dominant vs dominated

 Suppose Miachela believes that Connor will confess to the crime
 Then Michaela is better off confessing too

 Or suppose instead that Michaela believes that Connor will deny the crime
- Then Michaela is once again better off confessing too

 Therefore, strategy Confess is better than Deny for Michaela, regardless of her
beliefs about her opponent’s choices.

 Confess is a dominant strategy and Deny is a dominated




 A dominant strategy is one where, regardless of the chosen strategy of the
other player, one’s best response strategy is constant
 A dominated strategy is one where, regardless of the belief about the other
player’s strategy, it is never a best response.




How to write this out




With Player A choosing dominant strategy Down and Player B choosing dominant strategy
Right, the resulting Nash equilibrium is (Down, Right) and the Nash equilibrium outcome is (-
1 , 4)