CO 456: Assignment 1

Due Wed, September 26 in class. Include your name and ID number. Write the number of pages on the front page and number each page.

Problem 1 - 5 marks
Two candidates A and B compete in an election. There are n citizens and k support candidate A while n k support candidate B. You may assume 1 k n 1 (each candidate has at least one supporter). Each citizen must decide whether to vote for their candidate or abstain. After the votes are cast, the candidate with the most votes wins. If both candidates receive the same number of votes, we simply say the tie. While the outcome of the election is most important to the citizens, they are lazy and would prefer to abstain if their vote would not improve their candidates nal ranking. Formally, the game is presented as follows: Players: the n citizens Actions: for each citizens i, Ai = {vote, abstain} Utilities: the following table summarizes the utility a citizen i earns based on all actions taken. The rows corresponds to the actions for citizen i and the columns correspond to whether the candidate i voted for won, tied, or lost the election. vote abstain wins ties loses 4 2 0 5 3 1

Describe all pure Nash equilibria for this game and prove your answer is correct. You may assume that k n k (since the results for k > n k would be the same as for k < n k after swapping A and B). Hint: Consider tackling the cases k = n k and k < n k separately.

Problem 2 - 5 marks
Suppose two players are disputing over a perishable object that has a strictly positive initial value v > 0. The dispute begins at time 0 and continues until one of the players concedes. Since the object is perishable, it loses value over time. In particular, its value at time t is max{0, v t}. If both players concede at the same time, then they split the object evenly. If only one concedes, they get nothing and the other gets the whole object. Explicitly, the actions available to player i are nonnegative times ti 0. The utility functions ui (t1 , t2 ) for the players are described as follows. If t1 = t2 then ui (t1 , t2 ) = max 0, vti 2 for each player i.

If t1 < t2 then u1 (t1 , t2 ) = 0 and u2 (t1 , t2 ) = max{0, v t1 }. Similarly, if t1 > t2 then u1 (t1 , t2 ) = max{0, v t2 } and u2 (t1 , t2 ) = 0. Describe all pure Nash equilibrium and prove your answer is correct. 1

-2 -2 -2 -3 -1

-1 -2 -3

-3

Fig. 1: An example of a graph and an outcome for problem 5. The numbers indicate the utility of the edge. Notice that the leftmost edge receiving utility -2 would increase their utility by swapping.

Problem 3 - 10 marks + 1 bonus

Consider the problem of contributing to a public good. There are two players with given wealths w1 and w2 . The action of each player i is to contribute some amount ci to a public good. In this question, the payo ui (c1 , c2 ) for player i is given by (wi ci ) (c1 + c2 ). Intuitively, this means player i prefers private consumption if the total public good is already large. We allow ci to be negative or exceed wi . Find a pure Nash equilibrium for this strategic game and argue that it is unique. (4 marks) Consider the more general setting with n players, each having wealth wi . The payo function for player i is ui (c) = (wi ci ) n cj . Describe a system of n linear equations with variables c1 , . . . , cn j=1 whose solution(s) correspond exactly to pure Nash equilibra of this game. You are not required to solve this system to obtain a particular solution. (4 marks) Suppose w is a common wealth for the players (so wi = w for each 1 i n). Explicitly describe the ci values in the pure Nash equilibrium from the previous part (you may assume that the solution is unique without proving the bonus, just nd the ci values). (2 marks) Bonus: Prove that the general setting with n players having possibly dierent wealths wi has exactly one pure Nash equilibrium. (1 mark)

Problem 4 - 10 marks
Provide an example of a 2-person strategic game in which each player has nitely many actions, there is only one Nash equilibrium, and in this Nash equilibrium both players strategies are weakly dominated. You may present your answer in matrix form if you wish. Hint: There is an example where each player has exactly three actions. (5 marks) Prove that no such example exists if some player has at most two actions. (5 marks)

Problem 5 - 5 marks
Consider the following game played on an undirected graph G = (V, E) with no loops. The players are the edges and the actions available to an edge e = (u, v) E are choosing one of two directions u v or v u. After all edges have chosen a direction, we let in (v) denote the number of edges that were oriented towards a node v V . The utility of an edge e = (u, v) is equal to in (w) where w {u, v} is the node that e was directed toward (e does not like to be crowded at its chosen destination). See the gure for an illustration. Prove that this game always has a pure Nash equilibrium (in any graph, of course, not just the example). Hint: Show that the process of swapping the orientation of a single edge to increase its utility eventually terminates.