Question 1 (15 points): Consider the situation represented by the following bimatrix:
L
M
R
U
1,0
2,5
-2,-1
D
2,1
2,1
-3,2
1
(a) (5 points) Is there a strictly dominant strategy equilibrium of this game? Explain.
Answer: No. Neither player has a strictly dominant strategy. To see this, let us write down the best responses for each player. For player 1, we have
Therefore, player 1 does not have a strictly or weakly dominant strategy For player 2, we have
Note that M weakly dominates L but player 2 does not have a strictly or weakly domi- nant strategy. This follows because
u2(U,M) = 5 > u2(U,R) = 1 u2(D,M) = 1