ECShiftGraph.Shock · Shift(s) · Result
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EC311 · Intermediate Microeconomics

EC311 / TOPIC 33

8.7 Dominance, Nash and maximin

How do we find Nash equilibrium from a payoff table without choosing the highest total?

Nash is a strategy profile where no player gains from a unilateral deviation.

Follow the cause and effect

  1. For each column, find the row player’s highest payoff.

  2. For each row, find the column player’s highest payoff.

  3. Overlapping best responses are Nash; then separately inspect dominance or maximin.

The model you are using

KEY MODEL
(H,H):(6,6)
(H,L):(1,8)
(L,H):(8,1)
(L,L):(3,3)

Conditions for this model

Payoffs are ordered (A,B); one simultaneous move and each player prefers a higher payoff.

The exam trap

The highest total-payoff cell may not be Nash if one player wants to deviate alone.

Connect the reasoning to the graph

What changes

  • A payoff matrix is not a shifting-curve graph; the experiment checks unilateral deviations player by player.

What stays fixed

Payoffs are ordered (A,B); one simultaneous move and each player prefers a higher payoff.

Keep these conditions throughout the comparison; change only what the case above specifies.

What to inspect

Overlapping best responses are Nash; then separately inspect dominance or maximin.

Compare before and after, and locate the conclusion on the graph.

5 MINUTES · TRANSFER THE IDEA

Can you explain it without the lesson?

Construct a 2×2 game with two Nash equilibria and explain the coordination problem.

Lesson references

  • Pindyck & Rubinfeld, Microeconomics, 9th Global ed., pp. 505, 508–509
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