Dominance and N.E.

Question 1

Evidence of IESDS

Answer 1

1. Condorcet Paradox. The dominant strategy is to converge to the median voter.
2. Beauty Contest (Keynes, 1939), two thirds of the average game. The dominant strategy is to pick zero. Start of with it being weakly dominated to pick 66.66, then it becomes weakly dominant to pick 44.44, this iteration happens until 0. However people don’t pick 0. People choose what they think the average think person will think the average person will think.

Question 2

What is the link between Nash equilibria and stringer equilibria.

Answer 2

If S is either:

1. a strict dominant strategy equilibrium,
2. the sole survivor of IESDS, or
3. the unique rationalizable strategy profile.
   Then s is the unique Nash equilibrium.