Game Theory

What is Game Theory?

O It provides a series of Mathematical models

the may be useful in explaining interactive

decision-making concepts, Where two or
more competitors are involved under
conditions of conflict and competition

Important Terms
O Strategy
O Pay-Offs
O Saddle Point
O Value of a Game

Strategy
O The Strategy for a player in the list of all

possible actions that are likely to adopted by

him for every payoff (outcome).

Payoffs
O A quantitative measure of satisfaction that a

player gets at the end of the play

Saddle Point
O The saddle point in a payoff matrix is one

which is the smallest value in its row and

the largest value in the column. The saddle
point is also known as equilibrium point.

Value of a Game
O Its refer to the average payoff per play of

the game over an extend period of time.

Assumption of the
Games

O Each player has available to him a finite number of possible strategies(courses of action).
O Players act Rationally & Intelligently.
O List of Strategies of each player & the amount of Gain or Loss on an individuals choice of

strategy.
O One player attempts to maximize gains and the other attempts to minimize losses
O Both player make their decisions individually
O Both players select and announce their strategies simultaneously
O The payoff is fixed and determined in advances

Types of Games

O Two Person Games and n-person Games

O Zero sum and Non-zero sum Games

O Games of Perfect information and imperfect

Information
O Games with Finite and Infinite
O Constant sum-Games
O 2x2 person Games and 2xn and 2xm Games
O 3x3 and Larger Games
O Cooperative and Non-cooperative Games

Competitive
Situation

Pure Strategy

Mixed Strategy

Pure Strategies
O A particular Strategy that a player chooses

to play again and again regardless of others

players strategy.

Mixed Strategies
O A set of strategies that a player choose on a

particular move of the game with some

fixed probability

Various Method for Mixed Strategies

O Algebraic Method
O Analytical Method
O Matrix Method
O Short-Cut Method
O Graphical Method
O LP Method