JASHORE UNIVERSITY OF SCIENCE AND TECHNOLOGY (JUST)

IPE- 3109: Operations Research (4 credit hours)

Dr. Md Mahfuzur Rahman

Assistant Professor, Dept. of IPE
18th Apr, 2022
Intended Learning Outcomes (ILOs)
➢Theory of Games
➢Properties of games
➢Pure Strategy
➢Maximin-Minimax property
➢Dominance property
➢ Mixed Strategy
➢Algebraic Method
➢Graphical Method
➢Limitations of the game theory
➢Sensitivity Analysis
Theory of Games
Theory of Games: The Terminology Used
➢ A competitive situation is called game, in this context.

Game theory deals with decision situations in which two intelligent opponents with
conflicting objectives are vying to outdo one another.

Typical examples include launching advertising campaigns for

competing products and planning strategies for war battles.

In a conflict, each of two players (opponents) has a (finite or infinite) number

of alternatives or strategies. Associated with each pair of strategies is the payoff
one player receives from the other.
Properties of a Game
1) There are finite number of competitors called 'players’.
2) Each player has a finite number of possible courses of action
called 'strategies’.

3) All the strategies and their effects are known to the players but
player does not know which strategy is to be chosen.

4) A game is played when each player chooses one of his strategies.

The strategies are assumed to be made simultaneously with an
outcome such that no player knows his opponents strategy until
he decides his own strategy.

5) The game is a combination of the strategies and in certain units

(usually in terms of money) which determines the gain (shown
in positive figures) or loss (shown in negative figures).
Properties of a Game
6) The figures (either gain or loss) shown as the outcomes of
strategies in a matrix form is called "pay-off matrix“

7) The player playing the game always tries to choose the best
course of action which results in optimal pay off, called
“optimal strategy”.

8) The expected pay off when all the players of the game follow
their optimal strategies is known as "Value of the game". The
main objective of a problem of games is to find the value of the
game.

9) The game is said to be 'fair game if the value of game is zero,

otherwise it is known as 'unfair.
Terminologies of Game Theory
Strategy: A strategy for a player has been defined as a set of rules or alternative
courses of action available to him in advance, by which player decides the course
of action that he should adopt.

Strategy may be of two types :

(a) Pure Strategy : If the players select the same strategy each time, then it is referred to as
pure-strategy. In this case each player known exactly what the other is going to do i.e.,
there is a deterministic situation and the objective of the players is to maximize gains or to
minimize losses.
(b) Mixed Strategy : When the players use a combination of strategies and each player
always kept guessing as to which course of action is to be selected by the other player at a
particular occasion then this is known as mixed-strategy. Thus, there is a probabilistic
situation and objective of the player is to maximize expected gains or to minimize losses.
Thus, mixed strategy is a selection among pure strategies with fixed probabilities.

Optimum Strategy : A course of action or play which puts the player in the most preferred
position, irrespective of the strategy of his competitors is called an optimum strategy. Any
deviation from this strategy results in a decreased pay-off for the player.
Terminologies of Game Theory
Terminologies of Game Theory
Payoff Matrix : The matrix, which shows the outcome of the game as the players select their
particular strategies, is known as the payoff matrix. It is important to assume that each
player knows not only his own list of possible courses of action but also of his opponent.
Solving Two Person-zero Sum Games
A game with only two persons with a condition that the loss of one player is gain of the other
and vice-versa (so that total sum is zero) is said to be two-person zero-sum game or
rectangular game.

Two person zero sum games may be deterministic or probabilistic. The deterministic games
will have saddle points and pure strategies exist in such games. In contrast, the probabilistic
games will have no saddle points and mixed strategies are taken with the help of
probabilities.

Games With Saddle Points - Deterministic Games - with Pure Strategies :

These games can be solved by using one of the following methods.
i. Minimax and Maximin principle.
ii. Dominance principle.

Minimax and Maximin Criteria :

In a given pay off matrix of two players, it is evident that the row player will maximise his
minimum profits, thus applies maxi-min principle. i.e. the selection of maximum gains
(largest value) among the row minimum values is referred to as Maxi-Min principle. Similarly,
the column player attempts to minimise his maximum loss using his Mini-max rule. i.e. the
selection of least from column to minimise losses is called Mini-max principle.
Solving Two Person-zero Sum Games
If maximum value of row minima i.e., maximin value of row player is equal to the minimax
value of column player (i.e., minimum value of column maxima), then the game is said to
have 'Saddle (Equilibrium) Points', and the corresponding strategies are said to be 'Optimal
Strategies’.

The value of the pay off (say V) at this saddle (equilibrium) point is known as 'Value of the
Game'. A game may have more than one saddle point but the value will be same.
Steps To Find Saddle Points by Applying
Minimax-Maximin Criteria
Game Theory
Players Adithi and Sahithi have a competition to reach college early. Each has two strategies
viz going by car or going by a two-wheeler. If both go by cars, Sahithi reaches 5 minutes early
but if both go by two-wheelers, Adithi can reach 4 minutes early. If Adithi goes by car and
Sahithi by a two wheeler, Adithi reaches 2 minutes early while Adithi by two wheeler and
Sahithi by car keeps Sahithi 7 minutes early. If both can choose their strategies independently
and simultaneously and know these estimated pay offs each other, find who will win.
What will be outcome of the game and their optimal choices. (Applying Minimax-Maximin
Criteria)

Step 1 : To Write Pay Off Matrix

Game Theory
Step 2 : Find row minima and encircle these values.

Step 3 : Find maximum of row minima.

Game Theory
Step 4 : Find column maxima and enrectangle these elements.

Step 5 : Find Minimum of column maxima

Game Theory
As Maximin = Minimax or Max (Rmin) = Min (Cmax) the saddle point exists at first
row-first column element which is both encircled and enrectangled.
Example 2
Solve the following game:
Dominance Principle
➢ The dominance principle is used to reduce the order of the pay off matrix.
➢ Thus if saddle points exist, the matrix can be reduced to a matrix with one
element which is equal to value of the game.
Rule 1 : Row Dominance

For a row player, in a pay off matrix, if every element in a particular row is less than or equal to
the corresponding element of another row, then the former row is said to be inferior or
dominated by the latter. Therefore the row player will never employ the former row (strategy) for
whatever strategy that is used by nis opponent. Hence this row can be deleted from the pay off
matrix for further iteration.

Rule - 2 : Column Dominance

For a column player, in a pay off matrix if every element in a column is greater than or equal to
corresponding element of another column, the former column strategy never yields any better
result than the latter and therefore the former column will never be used whatsoever may be the
opponent's strategy. Hence the former column can be deleted from the pay off matrix for further
iteration.
Dominance Principle
Rule 3 : Modified Row Dominance
When no single row (pure) strategy has dominance over the other, then the comparison may be made
between a row and the average of a group of rows, if every element is less than or equal to average of
corresponding elements of a group, then the former row can be removed. If a row dominates over the
average of group of rows, then the group may be discarded.

There is no pure row dominance.

But by comparing the A1 average values of A2 and
A3 we have,
Dominance Principle
Rule - 4 : Modified Column Dominance
Similar to the modified row dominance rule, when no pure column dominance exists, a convex
linear combination i.e., average of certain pure strategies may be compared with another pure strategy
applying rule 2, i.e., if every element in a column is greater than or equal to corresponding element of
other column the former is omitted.

Clearly, their is neither pure column nor pure row dominance exist in the above pay off. But the average
(convex linear combination) of B2 and B3 is greater than or equal to corresponding element of first
column. Therefore B1 can be deleted. Thus we get,
Dominance Principle
An engineering student was frequently absent to the classes in a semester. To safe guard
himself he can choose one of the alternatives given below and the professor also had four
strategies. The student has approximated the probable percent of marks in the following pay
off matrix against various strategies.
The students strategies are showing reasons as
S1: due to ill health S2: to attend sister’s marriage are S3: went on project work S4: attended
inter college celebrations.
The professor's strategies are P1: Not giving attendance P2: Giving exam tough P3:Evaluating
strictly P4: Complaining to principal.
The pay off is:

Use dominance principle so that the student may choose his optimal strategy.
Dominance Principle
In the given pay off, by examining thoroughly we find that every element of P2 column is less
than or equal to the corresponding element of P1 column, hence professor will never use the
P1 strategy (P2 dominates P1, hence P1 is deleted.

From the above pay off, it is clear that, the student will never use S3 because every element of
S4 is greater than or equal to corresponding element of S3 (S4 dominates S3 ). Hence by using
the principle of dominance we delete S3 and revise the pay off as

Again P2 dominates P4, hence P4 is deleted, we get

Dominance Principle

Now, S4 dominates S2, hence S2 is deleted.

Thus student uses S4 strategy while professor uses P2 strategy i.e. The professor gives the
exam tough when student claims that his absence is due to attending intercollege celebrations
and the value of the game is 54.
Dominance principle
Dominance principle
Games Without Saddle point or Mixed Strategy Game
Commonly solved by any of the following methods:
Algebraic Method

A game with mixed strategy:

Algebraic Solutions
Algebraic Method
Suppose a general game without saddle points as given by :

✓ Since it is assumed that there are no saddle points, A wishes

to use a mixed strategy of A1 and A2 with the probabilities of
p1 and p2 and B to use a mixed strategy of B1 and B2 with
the probabilities of q1 and q2 respectively.

✓ According to the assumption that A always tries to

maximise his minimum returns and B tries to minimise his
maximum losses, they employ their strategies most
optimally such that the B's minimax losses will be equal A’s
maximin gains.
Algebraic Method
Find the best strategy and the value of the following game:

Apply minimax (maximin) principle to check saddle point:

Algebraic Method
The column B(II) dominates B(I) since every element in B(II) is less than its corresponding
element of B(I). Hence B(I) is deleted (B will never use B-l as it yields more losses against
any strategy played by A).
Now, they play a mixed
strategies with probabilities.
Since there are neither saddle
points nor any dominance.
Graphical Solutions
✓ Graphical solutions are helpful for the two-person zero-sum games of order 2 x n or m x 2
i.e., when one of the players have only two dominant strategies to mix while other has
many strategies to play.

✓ Graphical solutions used with an assumption that optimal strategies for both the players
assign non-zero probabilities to the same number of pure strategies.

✓ If one player has only two strategies, the other also should have to use same (two) number
of strategies. This method is helpful in finding out which two strategies can be used.

Case (i) : 2 x n games : In this case, row player has two strategies to play while column player
has n strategies. The graphical method is applied to find which two strategies of column
player are to be used.

Case (ii) : m x 2 games : In this case a column player has two strategies while row player can
choose optimal mix of best two among m strategies. The graphical method is used to Find
which two strategies of rows player would be the best.
Algorithm for 2 x n games
Algorithm for 2 x n games
Algorithm for 2 x n games
Algorithm for 2 x n games
Algorithm for m x 2 games
Algorithm for m x 2 games
Algorithm for m x 2 games
Sensitivity Analysis
Post-optimality analysis involves conducting sensitivity analysis to determine which parameters of the
model are most critical (the “sensitive parameters”) in determining the solution.

• Evaluate estimates of model parameters

• Determine crucial estimates that may affect optimal solution for further study

Role of sensitivity analysis

A main purpose of sensitivity analysis is

❖ To identify the sensitive parameters (i.e., those that cannot be changed without changing the
optimal solution).
❖ To assess the impact of changing the assumptions of the models
❖ Identifying the sensitive parameters
❖ to estimating each one more closely, or at least its range of likely values.

If the solution is implemented on an ongoing basis, any later change in the value of a sensitive
parameter immediately signals a need to change the solution.
Sensitivity Analysis

▪ In some cases, certain parameters of the model represent policy decisions (e.g., resource allocations).
If so, there frequently is some flexibility in the values assigned to these parameters. Perhaps some
can be increased by decreasing others. Postoptimality analysis includes the investigation of such
trade-offs.

▪ One purpose is to determine the effect on the optimal solution from the model if some of the
estimates of the parameter values turn out to be wrong.

▪ This analysis often will identify some parameters that need to be estimated more carefully be- fore
applying the model. It may also identify a new solution that performs better for most plausible values
of the parameters.

▪ Furthermore, certain parameter values (such as resource amounts) may represent managerial
decisions, in which case the choice of the parameter values may be the main issue to be studied,
which can be done through sensitivity analysis.
Sensitivity Analysis
➢ In many cases, we find the data set (A, b, C) needs to be changed
within a range after we obtained the optimal solution, and we are
interested to find the new optimal solution.

Thus, the possible changes are

a. Change in the cost vector;
b. Change in the right hand side vector (availability);
c. Change in the constraint matrix.

With the help of sensitivity analysis a relatively small amount of work

Is applied to the optimal table of the LPP to find the optimal solution of
the changed problem which saves time, labour and space.
Sensitivity Analysis
➢ Change in the Cost Vector :
Using
Low Cost Algorithm
Example:
Assignment algorithms
Hungarian Algorithm