Solution

ID: past-exam-of-the-computer-science-course-of-the-university-of-oxford/2020/computational-game-theory/1/f/solution

Write . If
then both players prefer buying against a buyer, since . Both prefer not buying against a nonbuyer: and . These strict opposite best responses give the interior crossing of a coordination game.
An explicit fully mixed Nash equilibrium follows from indifference. Let be X's probability of buying and Y's. X is indifferent when
and Y is indifferent when
Solving gives
Both numerators and denominators are positive. For the required inequality is , equivalent to ; the same comparison for again reduces to . Thus , and the equations make both actions best responses for each player. By linearity of expected payoff, neither player can profit by any other mixed strategy. At these formulas reach and are not fully mixed; the strict threshold matters.

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