Past exam of the mathematics course of the University of Cambridge 2013 iii Paper 38 6 b Solution Created 2026-10-03 Updated 2026-10-07
A security level payoff maximizes what a player guarantees against the opponent. Let be the row player's probability of the first action. Its guaranteed payoff isThe decreasing and increasing terms cross at , attaining ; moving either way lowers the smaller term. For the column player, any mixture has zero payoff against the first row, while its second-row payoff is nonnegative. Therefore andThe feasible set is the convex hull of the four joint pure-action payoff vectors. Its upper Pareto frontier connects to to . Write the row payoff as and column payoff as . On the first Pareto frontier segment, for . The Nash product isa concave quadratic with derivative , maximized at , , giving product . On the portion of the other Pareto frontier segment satisfying bargaining individual rationality, and . Its product derivative is positive throughout, so its largest product is at , smaller than . All dominated points can be discarded by Pareto efficiency. ConsequentlyThis payoff is implemented by a correlated payoff lottery choosing the payoff with probability and with probability . The convex hull permits such lotteries over joint outcomes; it is not restricted to independent mixed strategies.
Past exam of the mathematics course of the University of Cambridge 2013 iii Paper 38 6 c Solution Created 2026-10-03 Updated 2026-10-07
Transposing the second player's matrix leaves the row player's security level payoff at . The column player's second action now yields payoffs and , while its first yields zero for either row. Its security level payoff is therefore , guaranteed by the second action; against the first row no mixture can guarantee more. Thus .
The relevant upper Pareto frontier joins the payoff vectors and , so . On the segment satisfying bargaining individual rationality , the Nash product becomesIts derivative is and its second derivative is . HenceThe implementing correlated payoff lottery chooses with probability and with probability . Both players' gains are strictly positive: and . The new disagreement point must be recomputed after transposition; reusing the previous column security payoff would solve a different Nash bargaining problem.
Feasible payoff polygons, security points and Nash bargaining solutions before and after transposing the column payoff matrix
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