Game Theory ifs fal of confit and competion. Numerous examples valving avers in rfl inca por games, mitary bates, pas earpaigs, advising ae rmuketngcmpalgn by competing basins em nd 0 rt A asc entre is many thse sons i te el cuca depends pial spate comiseaton of States selced by the verre, Gane tay is 2 memati! heory tit ls ‘ith the gene eats of compete stots ike teen fora, bat way 1 Pines parla emghass on he devisen making procoses of be sdesues. ecaee compete sunon sre so bigs, gue they as applctions in 2 ‘ovety of rt, adng in sins and cooomce. For example, Sled Reference 3 rose varios bsiesapaton of game cry ad Selected Reference 1 oases on TS toplatons occoomics. The 109 Nobel Poze for Bononie Science an Won by John F Nas whore story fold In he movie ABest Nia), Jobe C. Has, ta Reinhard Sion ort snl felis nthe ery nooooperave panes. ‘Then Robert J Aumann and Thorns C. Seeing woa te 2018 Nobel Pie for Eo oe Sleces for enhancing cur endestandng of onl and ceopeatin Hugh ae theory analy ‘A bey ved in Sec. 14.65, reach op pe theory conic o ve ito ater comple ip competitive staons, However, th fons i is bape (Gah snplst ie led two-person, 2eo-sm games: Ashe nae imple, hese es lnvlve only wo adver or players (ho may be ae, cams, ms, nd 29 En) They ae called ems games becase one plyer wins whatever he oer one less 0 hat he mo hel net wings 20 ‘Sse Lasoo th basi el or perion, 2eo sm games and be wet Goursetons deste and lsat fen apoche Sling sch gues Thee ‘er conte by mentoning some ote nds compete stations ha ar deal with ty oer che of pume thay 14.1 THE FORMULATION OF TWO-PERSON, ZERO-SUM GAMES ‘ols the basic caters of wo-peran, esi pms, consider the game Calle od and evens. This ete censist nly oath plas rimanenal shaving ‘Ser cve ager o inges Ite nomber of Pinger ashe 0 at he ol mambo fer bth layers vn, thn the player ling eves, payer) wa the but (81)os Capren 14 GAME THEORY TABLE 141 Payot abe for wast coe > ome Ses fo he lye ting ods (payer 2) fe umber does ot ach plage 1 pays SL t0 ayer Ths ach player arto sates: oso eer oe fag to ges Fhe esting peyote payer in dala shown ate pay tbe given Table 18. Tn general ato pero game characte by 1. The smtgies of plage 2 The srg of ayer 2 The prot able ‘Before the game begins, ech player knows the seis shoo be table, he ones ‘he eppent saad and he payot ble. The stl pay ete gue consis of {ich pie simulanesay ceasing tty witoat Rowing ts opponent ei A sttey may vel oa snple non, ich a owing x erin mabe of Singin he 0 ed eves gue On the oe hand, im more complied ges i= ‘hing see of moves, a sraley ita predsteine ue that pcs completly tow os nro respon to och pone ceustance at ach ste ofthe game Fee ‘rumpl, saep for one sc ches wou neat ow to mathe next move fer ‘her posible posta oo the bad 0 tal amber of orb rps would be Ionia. Applications of game theory nomally iver fr les comple cot te sans han ches oe, but he sees ined canbe fly comple. "The pay table shows heen nine eager pla 1 tat wold et ‘om exe sombinton of rai fet wo layers Is he a fo payer {scant ‘tel fer lpr 2 jst th eae of hs on, dco he esa nat of he ue. "Ta nes ne payee may bin anyone doses ck a las, rove sha hey cert epee the wily to pape of he concern otcoe. How ‘et ity sot essary proportionate aunt of money (an eter commod- ig when Inge quanta ive. For example, $2 aon fr tats) is robabiy ‘word mach es an vce mt Stan wa per petson- note wot en Teche bomcen (1) 150 pect canoe of eshing $2 milo rather than ing tnd @) being sss of geting Silo, poor person robsbly wild mich peer oe Tate, Os te ote bad, the oleae cespooting to a ey cf ina pap ale ‘ould be "worth wie mach to pliger I are pucome consenting teary ‘fT gen he boiz, she sould be indie betes 30 prceat hance ceiving th former outa (ter tan thing) and ins reeving th ater ‘hima sete of gue hear the development of raat fo leg may, Two key stumpons we made 1 Bok players are rational 2 Rok lies chore hr ateie solely to prmte thrown weir (eo compas sion fr the oponea)- "se Sa Ser in of ce1142 SOLVING shMPLE GAMES—A PROTOTYPE EXAMPLE asa Came cry contrasts with deiion ana (ce Chup. 15) where the asumption is sat the deconsiker i lying 2 gue wih & passive opyonent—natre—wich ‘honwe staples in some random fashion “We sll evel the andar are too entra fo eons stgles by means cite exampes In partcalartheeod of tenet seco sees bow ge the ‘ys th or nd overs pao shuld be played. robles WL, 1441, and 1451 “Polnnteyou to ap the tehagtes developed nhs hap io solve fr he otal ‘yt ply thi ae) In aden, the next et pees a prototype example at le Tests the Fru of wo-prton,neo-sm ge and ts lt in sme ple Stats A more caaplisedvarton of is ges hen aed nto Se. 14.3 06 {elopa more gene etesion, Senton 14 aed 148 deste a opal procedure and 1 iear rossaniag foenalaos for svg such games, "J942 SOLVING SIMPLE GAMES—A PROTOTYPE EXAMPLE ‘Two plsian ar ening nt ach ther fr he US. Sena. Campaign plans mst ‘ow beads for thio Gy, which ae exerted obec eas of he hs ‘eso th ace. Tutte, both potas wast o pend hse cays camping into ‘iy es Bigowa snd Mogslopts. To avid wasting campaign hylan tare ‘tt nd spender one fl yn each ty oro fl dyin jst on of te ces, Hower sins th nesemaryamangemens must be mae in aance, nie poltican tril ern his re) epponent'capaign scolar as alized his own. ‘Thetfre each plan hs asked i cnpsign manape in ch ofthese eis oa ‘eos what he tact woud ben ems of votes morc os) fom te various posible ‘Stinnton of dys sen there by bimslf and bys opposer He then wishes 10 se ‘hs lfonaton o chow his Bes sttegy an bow fo we thee wo dys Formulation as a Two-Person, Zere-Sum Game ‘ofl this problem a» two peo, zero-sum gume, we must ently the wo _Ploers bol th we pln), th strates foreach ple, andthe po table ‘Ate problem as ben sao, ich payer hate flown tee States ‘Suatey 1= pend one dyin ch ety. ‘Seategy 2= fend both days in Big, ‘Stategy 3= spend Boh Ses Messopalis iy conta theater would ve cmp ina fie ation wh exch polis xs herr pons wl end the Se ey eferee zs is we as {ec issecond ayn atypia gy woul! be Spee te sy in Bg: ifthe oppor alan pends he ft ayn Bion, he pend he seond dy in Bown: Towers the opponent pend he rt yf Mgaopls the pend th soon dyn cgalopl Thee wold be pth stages, ne fe each connnof the to fs {55 cates, the opponent wo fey cle, ad he Wo sendy ees Ech pty nthe pel ble for player eresens the wit player I(r the ceive vii to player of he otcome retain frm he coesponding steses ‘hey the tno plats, From the oltcian’sviewpoit he sbjete it win rons, ‘hd ech additonal ve (bfre he lars he cutcome ofthe eto) icf qt vale {Shim Therefore the appropiate ens for th pao tbl for potiian Tare he xe ey icteric i et inl at cop ses sansa nen i.‘cumpren 4 cane THEORY TABLE 142 Form ofthe payoff able for otic 1 or the pole ‘magn preblem ty Poon Lamune ot 060 Yat) tort net votes non im he opponent the am of he net vtechangesin he wo ‘tes senlig from hee wo aye of cmpsgning. Using uns of 1,000 woes, his formation is summoned i Table 14.2 Came they atime at Bok lye are thing the une formulation Gcluling te sme pay fr payer) for choosing ele Stele: ‘However, we sould slo pinout his pyo abe weal not be appropri ctor infomation were aalibe to the poici In pr, sme that hey now excl tw the populace i lansing wo oe two dap befor the eto, shat ‘Sh pkin knows eat how many et te (pave ogee neds sch ‘nh favor ring the Itt day of eumpalaing 10 win te elon. Consul, the only sgnicaceof the ata presebed by Table 1432 woud eto inde which ‘olin woud win he lcton with ach combinion of seaege. Becase the ui- nt gal so win the elton snd esse he so he pray I lately ion- ‘Seta he ly ene nth able ten shoul be some poste constant (2, 1) trie policlan 1 ving and whe be aes ven ely a pobuifiy of waning can Tr Sacnined for exch combine of steps, the appropriate nes woul be be bail of wining ius be poly of lxng Demet hen woul pea pected vile Hower silty aur dats to make seh detesaons ot ‘iy senna, so tha example rsh howrans fll ne votes won By pl ‘Sin Ta the ents ate pot ae sing the form genial 142 we gee seme set of dat for he pat table lust how fo save thee erst ids of gues Variation 1 of the Example ‘ive ht Table 143 the pay table or player (olan 1), wich seg souk ech pliner sles TABLE 143 Pata for lps 1 ‘ation Tot the pola “Smpagn probe Payer1142. SOLVING SIMPLE GAMES—A PROTOTYPE EXAWE oss “Tis stuton i her special one, whete the answer cin be cbse just by splyiag the cone of dominated statis oul oat socio of infin {25 tl only one cee reas ‘A stey is dominated by od sate if the second ep lay a leat as food (nd sometines bet) rgudes of what he opponent docs. A ‘omit sestay ca be linn rimeily fom fe conden, Ase, Tble 14.2 includes no dominated sre fy layer 2. However player ys 3 i Ged by soaegy Tbecsse the ster bas le pods OS 0,22 14> — putes of wat pve 2 does. lininangseategy fom fr ‘her consider les the folowing rated pyo able: ‘cause bth ple arse tobe aol layer 2 bo an doce ta ae 1 tas only these two ssegie eal unde consideration, Therefore, payer 2 now does have » somites ssegy—stategy 3, whch is dominated by bth staepes 1 nd 2tosase ey aways hae anil ones for player? (sotto payer I) nhs edhced pay! al for stgy I 1-24 1 for steaegy 2: 2< 4,03). Bim Tang thi staegy yee Atti pin, sien 2 fr payer 1 comes dominated br selegy beans tbe tate is betes in sourn 2 @> 0) an equally pod io cola 1 (l=). Eliioning te donated stgy lea to Swatgy 2 for plye 2 now i dined by saegy I (<2) 30 sty 2 soald be slit, ‘Consequently, ba players shoul cet heir sey 1. Payer 1 he wll seve ‘apap fl fm player 2 hat x, pola 1 wil gus 1,000 ves rom ottcan 3. Te you would ist se another example of sling «game by wsng the conc of dominated sgn, on provided inthe Worked xa acon of he Book's sedate Tn genera the pay player 1 when bth player play opin is feed 1 05 the yale of the pame. A gue that he aoe of eld be ae game Since his iu umes aval of Its a game. "The cnopt ofa domed srateny ia wey seul on fo reusing the ie of the pay ale that nods to be eomsidered ah, unstal se ke ne et Sly eying the optimal wasn forte game. However, most games equ at- ‘ter approach at leash solving. as oseate by the next two variations ofthe sampleCcaorea 14 Game THEORY Variation 2 of the Example Now suppose tat tect data gi Table 14.45 he pyot able fr player (pli tian ITs gue does ot ave dined states, ts ot bios wha py rs shoul do, What ie of eteoning dos gue hor say thy soul se? ‘Cone payer 1. Byslestng sg Ibe cu wn 6 on sea ch 8 3, omeve beet ler rata nd us wl Seka sey at wil ott hi al fom lege pup f player 1 secs Hely tt player F woul incr los by ‘sng say Silat by sling strategy player coal wins bt mor pobbly staal opponent wuld ve hs lot nd fad sini es ple which ‘Sold eas lng as 4 On the ober bad player 1 ales stg? 2 bes poransed ex to lose enyhing aot he cul ven win smthing Therefore, trae roves he best pute (pay oO see 2 seems to bea wsonal” choice for ayer 1 nists tonal pont (This ie of reaping sume that th layers are averse {king larger lus han nesta conan to hse india ho eno) ‘ings age py apne lng of) ‘Now cone player 2. He could ase a mich ax 5 oe 6 by wing uateay 1 or3, ati pura ent eking even wth saepy 2 Therefor, by the sume rea Soni of seckng the ert gcse asin # aon oppose Bs appar choc is sate 2 ‘oth players chose heir tty 2 the es hat bth rok even, Tas, nhs case ier gaye poves pon Be best guste, bt Boh als are forcing the op ‘ont iato the ume poston Enen when the opponent esse player's stacy, he ‘Spponet cao expat infomation o improve his psn. Salem "The cod produto is ine of ein rs ca player hold py in such 2 yao mie hs asin loses whenever he esuling chk of egy canna puted by the oppent the improve hs poston. This socalled nay er- Teron tndad ceo proposed by gun ber fo sleing ast tn elec, Tie crron sys oslo fete tht woul be Best even fhe selection ware being enooed to th opponent before the pone choses a state. nts of the ‘abe impr ta planer 1 shoud set Ue saegy wie minimum aya s largn: whereas ple 2 shold coor the one whese maxima pat player 1s the ‘al Tis ein ke Tbe 14 re steep 2 eae ws the ma Imi strategy oc lye | nd toy 2s the manna sate fx lye 2. The eae ine pal f Oth ae ofthe mes ho Ta game ‘Neth nteeting fc it he sme ent in hs py ble ies bth he mat lin and inna ves, Th eas ht hit ety bo he al TO ‘dhe maxim fs clu. The poston of sch ential sale pint. TABLE 14.4 Payot tbl or player 1 fr variation 2 of the pola ‘ammplgn pret a sueteoy 1 2 seman prow 3 Q i “Senna {SOWING SIMPLE GAMES.-A PROTOTYPE EXAMPLE ost “The at hat his game poses sae polat was actual crac in tering ‘now i tou be payed. Berane of he ae pun, neither peer en take advantage the poo strep to mprove sow pot. In parca, when sys 2 pe- Sets o lee tht player Ling setey 2, player 2 Won incur» fos instead of Freaking even if be weve change fom hoi ln of aig Bt Seategy 2. Sk ‘ly playe 1 won nly wore is palo I be wee Yo change is ln. Tvs, the ayesha my mot o conser Changing satis, cert tke advantage ois fryonent ef prevent te opponent om aking advege of in. Therefor, ce hit 1s stables (alo called an eq soaion), layers 1 and 2 shal! exh Sively weir maxon ed simak erties, reece "Aste ext wea iets rome pms do ot posses ad poi in which case mee soli aay equa Variation 3 of the Example Late developmen ine anpaign re nthe na ao bl fr play I glia 1) Gren by Table 14, How sol hs gare be pape? ‘Sipe tht ot payer step spy he ima cso in hese way a in sav. Paye I an pane ot be wl leno roe tan 2 lig Seay 1 Slt ayer 2 can puree tbe wl eno ave tan 2By aa Se) 3. owere nlc th te min ve (~2) an th mime ae (2) 6 ot oi cid inh ese. The est ta hei mo sae eit. ‘What ae te tain consequenes if bots pars lan b use the sti us esived? I canbe sen tht payer | would win 2 from pay: which would make ‘aye 2 upp Bosse player 2s aoa and can therefore Frese his outcome, fe would hen conclu hat he i do sachet, sei wing 2 rte han To ing by playing saeny 2 instead. Becaseplyer Ii ba ratinal, be woald a tiie ths sth nd conclude tat he an lmprove consid, fom ~2 4, by ‘hanging fo ategy 2, Realizing this, player 2 would then cocidetswitching back 0 Stategy 3 o comer los of Yo ga of 3. Tis pousiy of a svitch woud xuse Player [wo conde agin wing soategy 1 fer Which the vhole cele would sat ‘rer agua, Tetfore sve thought gabe le Being payee oly once, on etsve hlce oe sty ietes that plier with a mosve to comer chasing Statepe, ‘tor ote advantage ot he opponent orto pretest the eponeat from aking a= in thor, the ognaly suggested solton player 0 play rag and payer 210 play satgy 3) san unetable slain 0 ecesay fo Govelop a more sitctry oo, Bat wha Kind of sain shld it be? “TABLE 14.5 Payot able for player 1 or vraton 3 ofthe politcal “ampaign probiom — mer |b 4 iose ‘CHAPTER 14_GAME THEORY ‘The key fact seems ob at whenever oe player’ sean i peicable the vent cn ke adage of i lafermion to improve hs poston. Therefore ane ‘Sia eae aoa pln fc lying a gue sch thi one i tn player ‘Gould beable to dface wich sttegy te oher wl ose Hens nts eae, raer as plying some kaown cteson for demining a single artery txt wil tis be ‘ed ie nessay to cee amon aeesve secepble sates on some id ‘Bodo basi By doing tis neithr player knows in ance whch of hs om sues tlhe ed, et sone wit oppenent wld "The sume sito aes wih he od acer gre itd in Sc, 4.1. The ol table for this pane shown Table 14.1 does at havea sae pit, s he me {doesnot hive able slation ear which suey (low one ge to Ege) ‘ch payer soul cows fo each ay fhe ge fc weal be fash for 3 Payer to way sho the se nner of ag lce he th oprnen old Begin © {wine sow te numberof ings hat wos win everytime Even payer say ‘tose Bvt cl somewhat pedicle ec fps tendo alles, De Dont ca tke advnage of hi nfrmatin fo mgrove hs aces of wig. Ae- fending game tery the atonal way to play theo nd evens ge it ake he ‘hoje ofthe stepy comp randomly cach ne. This canbe de, fer example, Dy Siping x cin (vt showing the ef he oppor) a thn showing. 296 Finger ec comes op head nd showing two finer he con ces al “Tis auggoe in very ger rms fhe hind of speach hat que for Bane lacking el pot In et potion we dase appre oe fal) Given is {sion the foloming wo sets wil develop precedes or ang a pal Way ‘ot plying sich gamer Vraon 3 of the piel campaign problem Wl coaune toe ot lsat thn ens ey ze developed [VES eames witn mixeo StRaTecies Whencter game doe ot poeta ade pol, game teary advies ech player ta ‘ign s proba ition over er eo Seagies.T expe hs mthematealy,et = pobbliytha player 1 wil se seatey# (= 1,25... om, 5) nobly that player 2 wile seatey J) = 12. —-- whem and nae te respective numbers of avible tps, Tus, payer would “poy br pus fo paying he ame by asning values oss ~ aye Boose thst ‘ales ae probabilities, hey would ned to be sonegave sad ato. Sua, he Plan for player 2 woul be dsene by the vals sh signs ott delson varies Dundas d These plans y= f il (Jeo) a asl eer © ined stein nth gl stapes ae ten called pore sree. "hes the gti actly layed tr nosenary fr cack pert ase one of et ures, Howey, his pre saigy woud be chosen by ing soe random "ce tea aranio dbs fom th probaly dbo ied byte mined ‘gy, wher this eon woul nce which pric pur suatey 10 Us "Pins pee tt les and van 3 of he piel cmpien rot (eee Table 145) sel he aed Seats 22.9) = GO) andi yn) ™ Ob ‘spectively. Th selecton wold sty tht plies ing mex hance pra igor) ot chocing eter pure) sae Lor bu be sacar ran 3 eal ‘Sholay, pliger 2s randomly chosing btwecn his ast pre sues. To play the game, each plier cul then ip cols to ete wich of is two acepble puesto be wil cally we143 GAMES word woxeD STRATEGIES oso Athongh no completly salary marie of performance sale fr eva sing mined sais, ey sel ope the expe pay. 3y spying the robe ‘By theory defines of expected ala, hi quantity it tan pterner = SS np whey the pyoif player I asp trae and player 2s pe stg In the example of miele ja pen, thre re four psuible pays (~2,2, 8, ~3), tach ecg wih a probly of so the expected puyol e 2 +2443) =E ‘Tou this mesure of efomance doc ot aloe eying ut the ik volved a laying the pame ba doer nee wat he vetage pay! Wil od tobe fe game Is played many nes. ‘By ting th mae, ne tery extend the comet of he minim ere ae atc sald pot and hoses aed seo ns cote, max transys tht hen lie shold slo the mind egy monies oe a= ‘mum especed os tne Bqealet when we oss on pls (aye 1 rate tan Toms (pyr) heros nso manasa, mani tbe mi spec pre payer Byte mim pected pao we mean te allt oe expe Py atc lt or nym otogy whic he pent un cote Th, ‘hemi staty fc player Itt spinal scoding os cron tone tha ‘isthe are uma expected payor at ses ai). The a of tis est anc th max val dent! bys) Sy, he opin seg) for payers ‘he ont rove te Ben guarantee est ow ess inal ad guranerees {biter espetd le ha a be ante y nyo the oppnent ned see [Bot (Ins tg i mina, dened by 7) ‘Recall hat when oly pe sate ere aed, games nt having sade poi ‘ure ont 0 Be wade (op sable saan). The feason Was sei at <5 50 thar the payers would want to cunge ele reais to improve thir ponons Sim fo games ith ned apes, is sveetry hat = fo the otal 30- Ton obese: Forts, according th minima heron of gue her, hs endian alays bells or such ges. Minimax there If mined steps we allowed, he pair mined seatpies "ha pal scoring to the minimss etn provi stable sltion With {r= y= be mlue of he game), that neler payer en do Bote By wn Teer changing er oi tt. ‘Oa poof fh there is ind a See. 14.8. Although he cone of nad ste becomes qin ithe paves played repeated Wri abe nrpetion whe he gate 0 be payed a onc. nhs ‘he, wings med sey sl vas Selecting an wing one paste aon ‘Skt ron te speed pobbity tbson), omit em moe ee ‘sth rndomoton rot and fit chose he aoe “est” pr ey te ed owen: whens pe doe nt havea pot we ve lly ted ee pe ‘cing ston for oh vin 3 ie oil canpign roble dhe oe ers se at player mast nor allo the oponeat eda wat hia wl (he {Sion greed under the sof pms tnory mast nt defely ely whieh pte ‘stay wl be oe when he pee wats). Parham, nf th ponent ile toa nly bs knowledge of te tendencies of he ast player dee pba or the pre sag chen) at diferent fom toe forte optima ied tae. hen {he opponent il xn le advanage of is Kaowedg to edace te expected payee ‘Bat aye Tarr, enly way panne stalin the pial expected aot660. Ciapren 14_ came THcony to rndaly set he pe sty to wd er the robubiliydsbaion forthe p- tit mined stg (ai satical poceds for making och «dom selon se ‘dace in Sex 204) "Now we nett show how ffs he optimal mixed stag foreach play. Thee ese mend of ing ths, One ea gph procedure at may be wed when ‘Ser oneof he pyr cal vo undone) pte regi: spac dase invest acon, When lager ease nolo the ara metic st wansform he Pst toner programing problem tat en cn be soled by he inpex method fon a compute Seo 14.3 dese his approach, [DDSa GRAPHICAL soLuTION PROCEDURE Conse ny sme wit mined stg cht fr minted strate don of fe pyre hn ol tw pestis. To be spec, kt [pee can minimize his expe aye ty choosing th pe stacey tt comepnds tothe “bron” tne fr tat