Game Theory

➢ Dominance Properties:
1) In the payoff matrix of player A, if all the entries in a row X (column X) are greater than
or equal to (less than or equal to) the corresponding entries of another row Y (column Y)
then row Y (column Y) is dominated by row X (column X). Under such situation row Y
(column Y) of the payoff matrix can be deleted.

2) In the payoff matrix of player A, if sum of each of the entries of two rows X and Y
(column X and Y) is greater than or equal to (less than or equal to) to the corresponding
entries of a third row Z (column Z) then row Z (column Z) is dominated by row X and
row Y (column X and column Y). Under such situation row Z (column Z) of the payoff
matrix can be deleted.

➢ Methods to solve Game Problem:

1) Game with Saddle point (Pure strategy Problem)
2) Dominance Rule
3) 2 X 2 game without Saddle point (Mixed strategy Problem)
4) m X n game without Saddle point (Through Linear Programming Problem)
5) 2 X n and m X 2 game without Saddle point (Through Graph)

➢ Solution of Mixed Strategy Problem for 2 X 2 Game:

For a given 2 X 2 game without saddle point, the following formula is used. If the payoff matrix
for Player A is given by as follows:

Player B
 a11 a12 
Player A 
 a21 a22 
Then the following formulae are used to find the optimal strategies and value of the game:

Optimal strategies for Player A

p1 =
( a22 − a21 ) , Where p2 = 1 − p1
( a11 + a22 ) − ( a12 + a21 )
Optimal strategies for Player B

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 q1 =
( a22 − a12 ) , Where q2 = 1 − q1
( 11 22 ) ( 12 21 )
a + a − a + a
and value of the game is

=
( a11.a22 − a12 .a21 )
( a11 + a22 ) − ( a12 + a21 )
➢ Solution of m x n Games as an L.P.P.:
Game problem can be formulated and solved as a linear programming problem. Suppose 3x3 pay-
off matrix is as follows.

A’s Strategy B’s Strategy

B1 B2 B3
A1 a11 a12 a13
A2 a21 a22 a23
A3 a31 a32 a33

Let us consider the problem first from A’s point of view. A is interested in maximizing the
minimum gain that can be obtained by playing this game. The objective, then, is to maximize the
minimum value of the game, U, subject to the constraints that regardless of the alternative that B
chooses, the expected pay-off shall be at least equal to U. Now, let x1, x2 and x3 be the
probabilities with which A plays the strategies A1, A2 and A3; E1 be the expected pay – off of A
when he plays the three strategies with these probabilities and B decides B1. Similarly, let E2 and
E3 be the expected pay – offs associated with the strategies B2 and B3 respectively, adopted by B.

E1 = a11 x1 + a21 x2 + a31 x3

E2 = a12 x1 + a22 x2 + a32 x3
E3 = a13 x1 + a23 x2 + a33 x3

We can now express the problem as

Maximize U (i.e. maximize the minimum value U)

Subject to

a11 x1 + a21 x2 + a31 x3  U

a12 x1 + a22 x2 + a32 x3  U (i.e. E2) likewise
a13 x1 + a23 x2 + a33 x3  U

and x1 + x2 + x3 = 1

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 Assuming that U is positive (which it, in any case, would be if all the pay – offs, aij’s, are
positive), we can divide all the constraints by U and attempt to minimize 1 / U rather than
maximize U. For this, we define a new variable set Xi = xi / U and restate the problem completely
as a linear programming problem, as follows:

1
Minimize = X1 + X 2 + X 3
U

Subject to

a11 X 1 + a21 X 2 + a31 X 3  1

a12 X 1 + a22 X 2 + a32 X 3  1
a13 X 1 + a23 X 2 + a33 X 3  1
X1 , X 2 , X 3  0

Looking from B’s point of view, it is easy to visualize that his problem to minimize, V, the
maximum loss that he is to incur by playing this game. B’s problem can be interpreted as the dual
to the linear programming model obtained above in respect of A. Also, we can derive it directly
from the information given. It follows,
Let y1, y2 and y3 be the probabilities with which B plays strategies B1, B2 and B3, respectively and
E1’, E2’ and E3’ be the expected pay – offs associated with the events that A chooses,
respectively, A1, A2 and A3 while B plays the strategies B1, B2 and B3 with the given probabilities.
Accordingly,

E1' = a11 y1 + a12 y2 + a13 y3

E2' = a21 y1 + a22 y2 + a23 y3
E3' = a31 y1 + a32 y2 + a33 y3

and
Now, the problem is to minimize V, subject to

a11 y1 + a12 y2 + a13 y3  V

a21 y1 + a22 y2 + a23 y3  V
a31 y1 + a32 y2 + a33 y3  V

and y1 + y2 + y3 = 1

If we define (assuming as before that V is positive) Yi = yi/V, and divide all constraints by V, we
can express the L.P.P. as follows:

1
Maximize = Y1 + Y2 + Y3
V
Subject to

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 a11Y1 + a12Y2 + a13Y3  1
a21Y1 + a22Y2 + a23Y3  1
a31Y1 + a32Y2 + a33Y3  1
Y1 , Y2 , Y3  0

This, clearly, is the dual of the L.P.P. given earlier.

We have stated that U and V should be positive. In cases where some aij’s are negative, U and V
may not be positive. In such cases, a constant is added to all the entries in the pay – off matrix as
will ensure that each of them would become positive. After this, the problem is solved in usual
manner and them the objective function is adjusted by subtracting that constant from it, which is
the required answer.
➢ Examples:
1) Formulate the following two – person, zero – sum game as an L.P.P. and solve for the
optimal strategies for both the players and the value of the game.

Player A Player B
B1 B2 B3
A1 5 4 7
A2 5 8 4
A3 8 5 6

Solution:

From A’s point of view: From B’s point of view:

Minimum 1 / U = X1 + X2 + X3 Maximum 1 / V = Y1 + Y2 + Y3
Subject to Subject to
5X1 + 5X2 + 8X3 ≥ 1 5Y1 + 4Y2 + 7Y3 ≥ 1
4X1 + 8X2 + 5X3 ≥ 1 5Y1 + 8Y2 + 4Y3 ≥ 1
7X1 + 4X2 + 6 X3 ≥ 1 8Y1 + 5Y2 + 6Y3 ≥ 1
X1, X2, X3 ≥ 0 Y1, Y2, Y3 ≥ 0

Where Xi = xi / U, (for i = 1,2,3) Where Yi = yi / V, (for i = 1,2,3)

Probability of A to play A1, A2, A3 resp. Probability of B to play B1, B2, B3 resp.
The solution to the game from B’s point of view is
Initial Simplex Table

CB B Cj 1 1 1 0 0 0 Mini.
b (= YB) Y1 Y2 Y3 S1 S2 S3 Ratio
YBi / Yij
(Where
Yij > 0)
0 S1 1 5 4 7 1 0 0 1/5
0 S2 1 5 8 4 0 1 0 1/5
0 S3 1 8 5 6 0 0 1 1/8
Zj 0 0 0 0 0 0
Cj - Zj 1 1 1 0 0 0

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 First Iteration

CB B Cj 1 1 1 0 0 0 Mini.
b (= YB) Y1 Y2 Y3 S1 S2 S3 Ratio
YBi / Yij
(Where
Yij > 0)
0 S1 3/8 0 7/8 13 / 4 1 0 -5/8 3/7
0 S2 3/8 0 39 / 8 1/4 0 1 -5/8 1 / 13
1 Y1 1/8 1 5/8 3/4 0 0 1/8 1/5
Zj 1 5/8 3/4 0 0 1/8
Cj - Zj 0 3/8 1/4 0 0 -1/8

Second Iteration

CB B Cj 1 1 1 0 0 0 Mini.
b (= YB) Y1 Y2 Y3 S1 S2 S3 Ratio
YBi / Yij
(Where
Yij > 0)
0 S1 4 / 13 0 0 125 / 39 1 - 7 / 39 - 20 / 39 12 / 125
1 Y2 1 / 13 0 1 2 / 39 0 8 / 39 - 5 / 39 3 /2
1 Y1 1 / 13 1 0 28 / 39 0 - 5 / 39 8 / 39 3 / 28
Zj 1 1 10 / 13 0 1 / 13 1 / 13
Cj - Zj 0 0 3 / 13 0 - 1 / 13 - 1 /13

Third Iteration

CB B Cj 1 1 1 0 0 0
b (= YB) Y1 Y2 Y3 S1 S2 S3
1 Y3 12 / 125 0 0 1 39 / 125 - 7 / 125 - 20 / 125
1 Y2 9 / 125 0 1 0 - 2 /125 26 / 125 - 15 /125
1 Y1 1 / 125 1 0 0 -28 / 125 - 11 / 125 40 / 125
Zj 1 1 1 9 / 125 8 / 125 5 / 125
Cj - Zj 0 0 0 - 9 /125 - 8 /125 - 5 /125

Here all Cj – Zj = Δij ≤ 0. So, the current table gives an optimal solution.
Optimal Solution is as follows:

Y1 = 1 / 125, Y2 = 9 / 125, Y3 = 12 / 125 and 1 / V = 22 / 125

Thus, V = 125 / 22 and
y1 = (1 / 125) X (125 / 22) = 1 / 22
y2 = (9 / 125) X (125 / 22) = 9 / 22
y3 = (12 / 125) X (125 / 22) = 12 / 22

Similarly, for player A the optimal solution is:

X1 = 9 / 125, X2 = 8 / 125, X 3 = 5 / 125 and 1 / U = 22 / 125

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Thus, U = 125 / 22 and
x1 = (9 / 125) X (125 / 22) = 9 / 22
x2 = (8 / 125) X (125 / 22) = 8 / 22
x3 = (5 / 125) X (125 / 22) = 5 / 22

2) The matrix below show the pay – off in a 3 X 3 game between two players X and Y. X is
maximizing player and Y the minimizing player.

a) Formulate a suitable Linear Programming model of the game with respect to the
minimizing player Y and derive the optimal strategy for Y.
b) Write down the dual of the above Linear Program and derive the solution to the dual
from the optimal tableau of the primal and interpret the meaning of this solution:

Y
1 -1 -1
X -1 -1 3
-1 4 -1

Solution:

a) Since some of the entries are negative, we add a constant 2 to each of the values
in the matrix.

Y
3 1 1
X 1 1 5
1 6 1

Next, let y1, y2 and y3 be the respective probabilities of player Y playing the
three strategies and V be the value of the game. We define Yi = yi / V. The LP
model is

From Y’s point of view:

Maximum 1 / V = Y1 + Y2 + Y3
Subject to
3Y1 + Y2 + Y3 ≥ 1
Y1 + Y2 + 5Y3 ≥ 1
Y1 + 6Y2 + Y3 ≥ 1
Y1, Y2, Y3 ≥ 0

Where Yi = yi / V, (for i = 1,2,3)

Probability of Y to play three different strategies.

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 The solution to the game from Y’s point of view is

Initial Simplex Table

CB B Cj 1 1 1 0 0 0 Mini.
b (= YB) Y1 Y2 Y3 S1 S2 S3 Ratio
YBi / Yij
(Where
Yij > 0)
0 S1 1 3 1 1 1 0 0 1/3
0 S2 1 1 1 5 0 1 0 1
0 S3 1 1 6 1 0 0 1 1
Zj 0 0 0 0 0 0
Cj - Zj 1 1 1 0 0 0

First Iteration

CB B Cj 1 1 1 0 0 0 Mini.
b (= YB) Y1 Y2 Y3 S1 S2 S3 Ratio
YBi / Yij
(Where
Yij > 0)
1 Y1 1/3 1 1/3 1/3 1/3 0 0 1
0 S2 2/3 0 2/3 14 / 3 -1/3 1 0 1
0 S3 2/3 0 17 / 3 2/3 -1/3 0 1 2 / 17
Zj 1 1/3 1/3 1/3 0 0
Cj - Zj 0 2/3 2/3 -1/3 0 0

Second Iteration

CB B Cj 1 1 1 0 0 0 Mini.
b (= YB) Y1 Y2 Y3 S1 S2 S3 Ratio
YBi / Yij
(Where
Yij > 0)
1 Y1 5 / 17 1 0 5 / 17 6 / 17 0 - 1 /17 1
0 S2 10 / 17 0 0 78 / 17 - 5 /17 1 - 2 / 17 5 / 39
1 Y2 2 / 17 0 1 2 / 17 - 1 / 17 1 3 / 17 1
Zj 1 1 7 / 17 5 / 17 1 2 / 17
Cj - Zj 0 0 10 / 17 - 5 / 17 -1 - 2 / 17

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 Third Iteration

CB B Cj 1 1 1 0 0 0
b (= YB) Y1 Y2 Y3 S1 S2 S3
1 Y1 10 / 39 1 0 0 29 / 78 - 5 / 78 - 2 / 39
1 Y3 5 / 39 0 0 1 - 5 / 78 17 / 78 - 1 / 39
1 Y2 4 / 39 0 1 0 - 2 / 39 - 1 / 39 7 / 39
Zj 1 1 1 10 / 39 5 / 39 4 / 39
Cj - Zj 0 0 0 - 10 / 39 - 5 / 39 - 4 / 39

Here all Cj – Zj = Δij ≤ 0. So, the current table gives an optimal solution.
Optimal Solution is as follows:

Y1 = 10 / 39, Y2 = 4 / 39, Y3 = 5 / 125 and 1 / V = 19 / 39

Thus, V = 39 / 19 and
y1 = (10 / 39) X (39 / 19) = 10 / 19
y2 = (4 / 39) X (39 / 19) = 4 / 19
y3 = (5 / 39) X (39 / 19) = 5 / 19
Also, the value of the game is = 39 / 19 – 2 = 1 / 19.

b) Dual Problem:

Minimum 1 / U = X1 + X2 + X3
Subject to
3Y1 + Y2 + Y3 ≥ 1
Y1 + Y2 + 6Y3 ≥ 1
Y1 + 5Y2 + Y3 ≥ 1
Y1, Y2, Y3 ≥ 0

Where Yi = yi / V, (for i = 1,2,3)

Probability of Y to play three different strategies.

Similarly, for player X the optimal solution is:

X1 = 10 / 39, X2 = 5 / 39, X 3 = 4 / 39 and 1 / U = 19 / 39

Thus, U = 39 / 19.
From the final table of the dual problem

x1 = (10 / 39) X (39 / 19) = 10 / 19

x2 = (5 / 39) X (39 / 19) = 5 / 19
x3 = (4 / 39) X (39 / 19) = 4 / 19

Also, the value of the game is = 39 / 19 – 2 = 1 / 19.

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