Game Theory
The 2x2 Payoff Matrix
In the following interactive examples, you will see how a 2x2 payoff matrix can represent a real world scenario. The three examples are of increasing difficulty, allowing you to work through each one in sequence (easy, medium, and then hard) or jump to the one that you feel confident to tackle. In each example you will investigate the strategies that are best responses to the strategies of identified competitors, find the Nash Equilibria, and identify any dominant strategies.
You can work through each example as many times as you like - just come back to this page and start again.
Key definitions you will need to remember:
A Nash Equilibrium is a set of strategies where each player is choosing the best strategy given the strategies chosen by the other players, and when no player can gain by a change of strategy if the other strategies remain unchanged.
A dominant strategy is when, regardless of what strategy the other player/s choose, one particular strategy is always the best response for you.
In the following interactive examples, the players are the competing companies.
Good luck!
