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GT Handout 8: Zero Sum Games and Saddle Points

**Zero-Sum Games and Saddle Points
**

B: North South

A: East West

Row 1

7

2

Col 3

1

Likes High

Row 2

2

2

5

Row Min: 2

5

3

Saddle Point

Nash equilibrium

4

Row Min: 3

Col Max: 7

Col Max: 3

Col Max: 5

Altitudes

Col 1

Col 2

Likes Low

Altitudes

Row 3

Minimax: min

from set of maxima

Row Min: 1

**B chooses min from A’s
**

chosen set of maxima

Maximin: max

from set of

Minima

A chooses max

from B’s chosen set

of minima

**If a zero-sum game has a saddle point, a Nash equilibrium can be found in pure
**

strategies.

A saddle point is a point in a domain of a function that is a stationary point, but not a

local extremum. A saddle point is a coordinate that is a maximum in one direction, and

a minimum in another direction. A saddle point occurs in a zero-sum game under the

following condition.

A saddle point exists when the maximin outcome for a row player using a pure strategy

coincides with the minimax outcome for a column player using a pure strategy. A

saddle point is also a Nash equilibrium- they are mutual best responses against each

other. Once a saddle point is reached, no player in the game will want to unilaterally

deviate from it. There are two types of strategies the players will be using in the

presence of a Saddle Point. They are:

Maximin Strategy: The best (highest) payoff from a set of minima. Player A- the Row

Player will opt for this strategy. Minimax Strategy: The worst (lowest) payoff from a

set of maxima. Player B- the Column Player will opt for this strategy.

Two friends A and B have to decide on a holiday location for camping. Friend A is the

row player who chooses a site on the East-West track. Friend A likes high altitudes and

would ideally choose a site as high as possible. Friend B is the column player who

chooses a site on the North-South track. Friend B does not like high altitudes and would

ideally choose a site as near as possible to sea level.

The two friends have mutually conflicting interests. However, unlike the Matching

Pennies Game, the game is not non-cooperative. The two players have to establish a

binding contract if they want to enjoy the vacation together. The payoffs are shown in

the matrix above. The payoffs are shown as the heights of the holiday location. The

heights can be viewed as a zero-sum game. Each height will bring comfort (positive

2013 GT: 01819 219050 asrarul@gmail.com

-1–

asrar.chowdhury@facebook.com

2. Player B does not like heights and will thus choose low heights. A cooperative game can be played. This is consistent with inter-dependent decision-making of Game Theory. The game needs to be a cooperative. This arises at the intersection of Row 3 and Column 2. This is 3.5). Column Maxima: (7. The minimax strategy then says: Player B chooses the minimum from this set of maxima.com -2– asrar. RESPONSES OF PLAYER B to A’s Chosen Actions: Ideally Player B would choose low altitudes. This means they will play maximin and minimax strategies. The intersection of the maximin and the minimax gives the Saddle Point. The maximin strategy then says: Player A chooses the maximum from this set of minima. Player A likes heights and will thus choose high heights.3. Player B’s choice depends on what Player A will do. but discomfort (negative utility) to the other player.Asrar Chowdhury GT Handout 8: Zero Sum Games and Saddle Points utility) to one player. Player A chooses the minimum of each Row. Row Minima: (1. This is consistent with inter-dependent decision-making of Game Theory.5). Player A likes high altitudes.the maximum from the three row minima in Row 3. 2. Players can establish a binding contract. 2013 GT: 01819 219050 asrarul@gmail. RESPONSES OF PLAYER A to B’s Chosen Actions: Ideally Player A would choose high altitudes. This results in the following set of minima from Row 1-3: (1. When Row Minima and Column Maxima are not the same a Saddle Point exists in a zero-sum game.the minimum from the three column maxima in Column 2.2. This is 3. Since Player A chooses high altitudes.chowdhury@facebook. The features of the game: The game is a zero-sum game. Since the game is cooperative the following is also observed: 1. Player A and B have mutually conflicting interests. and Player B likes low altitudes. The Nash equilibrium will need both players to play a conservative strategy to reach equilibrium. This results in the following set of maxima from Row 1-3: (7. Player A’s choice depends on what Player B will do. Since A and B want to spend a vacation together they need to establish a binding contract.3).com . Since Player B chooses low altitudes. The Row Minima and the Column Maxima are different.3. The payoffs are not symmetrical. The maximin and the minimax strategies arise because of mutually conflicting interests.3). Player B chooses the maximum of each Row.

Asrar Chowdhury GT Handout 8: Zero Sum Games and Saddle Points The Saddle Point. New York: Penguin. 2011. Edward C Rosenthal. -.at the intersection of the maximin and minimax. but around it). The solution came from a conjecture from the French mathematician Emile Borel that zerosum games do not have a solution. This is also the same year John Nash was born. The reasons are as follows: 1. 2. Players seek a conservative strategy when a Saddle Point exists and thus the Maxi-Min and Mini-Max strategies.chowdhury@facebook. and the minimising player (Column.com -3– asrar.com .introduced the Saddle Point solution to solve zero-sum games in 1928. Their mutually conflicting interest in a cooperative game leads them to rest somewhere in the middle at 3 (not necessarily at the centre. The intersection of maximin and the minimax gives the Saddle Point which is a mutual best response of both players given what the other player will do. B) is choosing the minimum payoff from a set of maxima (the maximum value determined by the other player).The Father of Game Theory. Player A would want to be at the right extreme: 7. but moves downwards because Player wants to move in the opposite direction. Non cooperation in the Matching Pennies game indicates players will have aggressive strategies.The End –- Adapted from: Complete Idiots Guide to Game Theory: The fascinating math behind decision-making. but not desirable for Player B. The Saddle Point is thus a stable equilibrium and also a Nash equilibrium. The conservative attitude of the players can also be explained observing the range of the heights in this example that ranges from 1 to 7. The Matching Pennies Game does not have a Saddle Point because it is non-cooperative. but for Player A. 3. The Saddle Point is based on the maximin and minimax strategies where the players are choosing their best responses in accordance to the behaviour of the other player. Deviation along the Row to 5 or 4 is desirable for Player A. A zero-sum game has a Saddle Point only if it is cooperative. The Saddle Point is the solution since the concept of the Nash equilibrium did not appear until 1950. but moves upwards because Player A wants to move in the opposite direction. Conversely. The behaviour is conservative because the maximising player (Row. 2013 GT: 01819 219050 asrarul@gmail. Once a saddle point is reached at. Deviation along the Column to 2 is desirable for Player B.is also a Nash equilibrium. A) is choosing the maximum payoff from a set of minima (the minimum values determined by the other player). Ideally. Therefore a Maxi-Min and Mini-Max strategy will not exist. no player will unilaterally want to deviate. John von Neumann. Player B would like to be at the left extreme: 1. It also qualifies as a Nash equilibrium.

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