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Minimax Theorem and Nash Equilibrium
Minimax Theorem and Nash Equilibrium
Int. J Latest Trends Fin. Eco. Sc. Vol-2 No. 1 March 2012
Abstract— Two important results in Economics, the - The other player chooses strategies (points)
Minimax Theorem and the Nash Equilibrium are in B in order to minimize ( ) (or
presented together with their mathematical maximize ( ) ): it is the minimizing
fundaments. The results are obtained in the field of player.
Functional Analysis.
Keywords— Minimax Theorem, Nash Equilibrium. ( ) is the payoff function.
The function
( ) represents, simultaneously, the maximizing
1. Introduction player gain and the minimizing player loss in a move
where they choose, respectively, the strategies and
In this work it will be seen as the convex sets strict
separation result allows obtaining a fundamental . So the gain of one of the players is identical to the
result in Game Theory: The Minimax Theorem. The loss of the other. Because of it the game is said of
mathematical structure considered is the real Hilbert null sum.
spaces, see Ferreira et. al (2010).
In these conditions the game has value C if
Then the same will be done for Nash Equilibrium
( )
using mainly Kakutani’s Theorem, see Kakutani
(1941), Matos and Ferreira (2006) and Ferreira et. al ( ) ( )
(2010).
If, for any ( ) ( ) ( ) is said
2. Minimax Theorem to be a pair of optimal strategies. It will be also a
The context considered is the one of the Games of saddle point if it verifies in addition
two players with null sum:
( ) ( ) ( )
- Be ( ) a two variables real function, ( )
being a real Hilbert space.
- ( ( ) ) ( ∑ ( ( ) ) (∑ )
) ( ) ( ) for x in A and
in B, (that is: ( ) is and so the convex extension of ( ) does not
convex in y for each x), intersect P.
̅̅̅̅̅ ( ) ( ) ( )
So (2.1) holds, that is the game has a value. ̅̅̅̅̅ ( )
Demonstration:
So ⋂ . Then, G and P may be strictly
Beginning by the most trivial part of the
separated, and it is possible to find a vector in
demonstration:
with coordinates , such that
( ) ( ) ( )
∑ ( ( ) ) ∑
and so
For any y in B, be * ( ) +
In fact,
is closed, limited and convex. Suppose that, for a
finite set ( )⋂ . Consider the
⋂
transformation from A to defined by
Observation:
3. Nash Equilibrium - The simplex is non degenerate if the n
The formulation and resolution of a game is very vectors are linearly
important in Game Theory. There are several game independent.
2
A continuous convex functional in a Hilbert space has
- If ∑ the numbers , …,
minimum in any limited closed convex set. are called the barycenter coordinates of x.
39
Int. J Latest Trends Fin. Eco. Sc. Vol-2 No. 1 March 2012
- The barycentre of the simplex This is so because a strategic equilibrium is, in effect,
〈 〉 is the point having the whole defined as profile that is a best response it itself.
barycenter coordinates equal to ( ) .
Thus the proof of existence of equilibrium amounts
Definition 3.3 to a demonstration that the best response
correspondence has a fixed point. The fixed – point
Call ( ) the expected payoff function of player n theorem of Kakutani asserts the existence of a fixed
associated to the mixed strategy profile point for every correspondence from a convex and
( ) compact subset of Euclidean space into itself,
provided two conditions hold. One, the image of
Definition 3.4 every set must be convex. And two, the graph of the
A Nash equilibrium of a game is a profile of mixed correspondence (the set of pairs (x,y) where y is the
( ) such that for each image of x) must be closed.
strategies
for each and in , if ( ) Now, in the mixed extension of a finite game, the
then strategies set of each player consists of all vectors
(with as many components as there are pure
( )
strategies) of non negative numbers that sum to 1;
( )
that is, it is a simplex. Thus, the set of all strategy
Observation: profiles is a product of simplexes. In particular, it is a
convex and compact subset of Euclidean space.
- So an equilibrium is a profile of mixed Given a particular choice of strategies by the other
strategies such that a player knows what players, a player’s best responses consist of all
strategies the other players will go to (mixed) strategies that put positive weight on those
choose, and no player has incentive to pure strategies that highest expected payoff among all
deviate from the equilibrium since that it the pure strategies. Thus, the set of best responses is a
cannot improve its payoff through an sub simplex. In particular, it is convex.
unilateral change of its strategy.
Finally, note that the conditions that must be met for
- A Nash equilibrium induces a necessary a given strategy to be a best response to a given
condition of strategic stability. profile are all weak polynomial inequalities, so the
graph of the best response correspondence is closed.
For the sequence it is necessary the following result:
Thus, all the conditions of Kakutani’s theorem hold,
Theorem 3.1 (Kakutani) and this completes the proof of Theorem 3.2.