In: Economics
True or False: In any Nash equilibrium, if a player is paying two (or more) strategies with positive probability, then she is indifferent between any of those strategies. (provide examples)
Answer to the question:
The statement is true.
For example
A mixed strategy is a probability distribution over the set of actions.
The police chooses to set up checkpoints with probability 1/3
What should you do?
If you drink cola you get 0
◮ If you drink wine you get −2 with prob. 1/3 and 1 with prob. 2/3 ⋆
What is the value of this to you? ⋆
We assume the value is the expected payoff: 1/ 3 × (−2) + 2 /3 × 1 = 0
◮ You are indifferent between Wine and Cola
◮ You are also indifferent between drinking Wine and Cola with any probability