Question

4. Two friends are playing a matching card game where friend 1, Max, chooses an Ace, Two, or Three and friend 2, Lucy, plays King, Queen, or Jack. Depending on what cards they play, they split the pot differently. The payoffs are summarized in the following table: Luey King Queen Jack Ace (4,1) (1,2) (3,2) Max Two (3,2) (3,3) (2,1) Three (1,1) (1.2) (4,4) (a) Use iterated elimination of strictly dominated actions (IESDA) to eliminate actions for Max and Lucy. Write out which action is dominated and HOW it is dominated (if you use a mixed strategy to eliminate another action, you need to specify the set of possible mixes or a particular mix) (8 points)

Answer 1

If Max chooses Two, Lucy will choose Queen as 3>1 and of Lucy chooses Queen, Max will choose Two, as 3>1. So, (two, Queen) is nash equilibriim. Similarly, (Three, Jack ) is a nash equilibrium.