GAME THEORY

GAME THEORY - DEFINITION

 A mathematical analysis of competitive situations
involving two or more participants where the outcomes
are affected by the actions of a participant as well as
those of others.
GAME

 An activity between two or more players involving

actions by each one of them (according to a set of rules)
that results in some gain (positive, negative or zero) for
each.
PAYOFF MATRIX
 A table showing the gains/losses to the player on the left
hand side against various courses of action employed by
both players in a two-person zero-sum game.
TWO-PERSON ZERO-SUM GAME
 A game of two players in which the gains of one player
are equal to the losses of the other.
STRATEGY
 The predetermined rule by which a player decides his
course of action.
PURE STRATEGY
 If a player selects a particular course of action alone,
ignoring his remaining alternatives, then the chosen
course of action is known as Pure Strategy.
MIXED STRATEGY
 If a player employs more than one course of action, then
player is said to follow a Mixed Strategy

 Methods Adopted
2 * 2 matrix - algebraic/arithmetic method
 3 * 3 matrix - oddments method
 2 * n matrix - Graphical method
 m * 2 matrix - Graphical method
 m * n matrix - LP method
VALUE OF A GAME
 It is the expected pay-off of play when all the players of
the game follow their optimal strategies.
PRINCIPLES
 Maximin Principle
 Maximizing the minimum guaranteed gains of player A with
respect to different alternatives of A iirespective of B’s
alternative
 Minimax Principle
 Minimizing the maximum possible loss of player B with
respect to different alternatives of B irrespective of A’s
alternative
 Saddle point
 Ina game, if the maximin value is equal to the minimax
value, then the game has a saddle point. The intersecting cell
corresponding to these values is the saddle point. If the game
has a saddle point, then each player adopts a pure strategy.