EMG181

SW GAME THEORY
4TH Quarter SY 2011-2012
1) The game shown below give As payoff. Determine the value of x and y that will make entry
(2,2) of the game a saddle point.
Answer:

A1

B1
1

B2
y

B3
6

A2

10

6
x>=5 so that the
column maximum
is x>=5

2
Y<=5 so that the
column maximum
is 5 (Min)

3
10

A3
Column
Maximum

Row Minimum
Y<=5 so that row
minimum is 1
x>=5 so that row
minimum is 5
(Max)
2

Therefore, x >= 5, y <= 5 . Value of the game = 5 which is at (2,2).

2) Two companies promote two competing products. Each product currently controls 50% of the
market. Because of recent improvements in the two products, each company is preparing to
launch an advertisement campaign. If neither company advertises equal market share will
continue. If either company launches a stronger campaign, the other is certain to lose a
proportional percentage of its customers. A survey of the market shows that 55% of potential
customers can be reached through television, 35% through newspapers and 10% through radio.
a) Formulate the problem as a two-person zero-sum game, and select the appropriate
advertisement media for each of the two companies.
b) Determine a range for the value of the game. Can each company operate with a single pure
strategy?
Answer:
a) Define the following strategies:
Strategy
1
2
3
4
5
6
7
8

Description
Do nothing
Use TV
Use Radio
Use Newspaper
Use TV and Radio
Use TV and Newspaper
Use Radio and Newspaper
Use TV, Radio and Newspaper

The payoff is the additional percentage of customers reached by company A.

Strategy

Company
A

Share
1
0%
2
55%
3
35%
4
10%
5
90%
6
65%
7
45%
8 100%
Column
Maximum

0%
0
55
35
10
90
65
45
100
100

55%
-55
0
-20
-45
35
10
-10
45
35

35%
-35
20
0
-25
55
30
10
65
65

10%
-10
45
25
0
80
55
35
90
90

Company B
5
6
90%
-90
-35
-55
-80
0
-25
-45
10
10

65%
-65
-10
-30
-55
25
0
-20
35
35

45%
-45
10
-10
-35
45
20
0
55
55

100%
-100
-45
-65
-90
-10
-35
-55
0
0
(Min)

Row
Minimum
-100
-45
-65
-90
-10
-35
-55
0 (Max)

b) The game has a saddle point at (8,8). This means that both companies venture into using all
three media. The value of the game is zero (fair game).

3) Below is a two-person, zero-sum game based on Player As payoff:

Strategy
Player A

A1
A2
A3
A4

Player B
B1
1
2
-3
-7

B2
9
9
-4
-4

B3
6
8
10
-6

B4
0
4
-3
-5

a) Specify the range for the value of the game.

b) Formulate the game by linear programming.
c) Solve the game graphically. Determine the optimal strategy and value of the game. Who
wins the game?
Answer:
Strategy

Player A

A1
A2
A3
A4
Column Maximum

B1

B2

1
2
-3
-7
2 (Min)

9
9
-4
-4
9

Player B
B3
6
8
10
-6
10

B4

Row
Minimum

0
4
-3
-5
4

0
2 (Max)
-4
-7

a) V = 2
b) LP Formulation:
Player As Linear Program:
Maximize z = V
Subject to:
V - p1 - 2p2 + 3p3 + 7p4 <= 0
V - 9p1 - 9p2 + 4p3 + 4p4 <= 0
V - 6p1 - 8p2 - 10p3 + 6p4 <= 0
V
- 4p2 + 3p3 + 5p4 <= 0
p1 + p2 + p3 + p4 = 1
p1, p2, p3, p4 >= 0
V unrestricted
Player Bs Linear Program:
Minimize z = V
Subject to:
V - q1 - 9q2 - 6q3
>= 0
V - 2q1 - 9q2 - 8q3 - 4q4 >= 0
V + 3q1 + 4q2 - 10q3 + 3q4 >= 0
V + 7q1 + 4q2 + 6q3 + 5q4 >= 0
q1 + q2 + q3 + q4 = 1
q1, q2, q3, q4 >= 0
V unrestricted
c) Optimal Strategy: Player A plays A2 while player B plays B1.
Value of the Game, V = 2
Player A wins the game.
Since the game used pure strategy, no need to solve graphically.
NOTE: THERE WAS A TYPOGRAPHICAL ERROR IN THE DATA: Entry (2,2) should be -2. So the game
matrix should be ,
Strategy

Player A

A1
A2
A3
A4
Column Maximum

B1

B2

1
-2
-3
-7
1 (Min)

9
9
-4
-4
9

Player B
B3
6
8
10
-6
10

B4

Row
Minimum

0
4
-3
-5
4

0 (Max)
-2
-4
-7

a) 0 <= V <= 1 (Mixed Strategy)

b) LP Formulation:
Player As Linear Program:
Maximize z = V
Subject to:
V - p1 + 2p2 + 3p3 + 7p4 <= 0
V - 9p1 - 9p2 + 4p3 + 4p4 <= 0
V - 6p1 - 8p2 - 10p3 + 6p4 <= 0
V
- 4p2 + 3p3 + 5p4 <= 0
p1 + p2 + p3 + p4 = 1
p1, p2, p3, p4 >= 0
V unrestricted
Player Bs Linear Program:
Minimize z = V
Subject to:
V - q1 - 9q2 - 6q3
>= 0
V + 2q1 - 9q2 - 8q3 - 4q4 >= 0
V + 3q1 + 4q2 - 10q3 + 3q4 >= 0
V + 7q1 + 4q2 + 6q3 + 5q4 >= 0
q1 + q2 + q3 + q4 = 1
q1, q2, q3, q4 >= 0
V unrestricted
c) Graphical Solution:
Dominance:
Strategy
Player A

A1
A2
A3
A4

Player B
B1
1
-2
-3
-7

B2
9
9
-4
-4

B3
6
8
10
-6

B4
0
4
-3
-5

A4 dominated by A1
B3 dominated by B1
A3 dominated by A1
B2 dominated by B1 and B4

Player
A

Probability

Strategy

P
1p

A1
A2

Player B
B1
1
-2

B4
0
4

Player A:
Bs Choices
B1
B4

As Expected Payoff
p - 2(1 p) = p 2 + 2p = 3p - 2
0p + 4(1 - p) = 4 - 4p

V
6

0
p=1

p=0
-1
-2

VB1 = VB4
3p 2 = 4 - 4p
7p = 6
p = 6/7
1 p = 1/7
Optimal Strategy: Player A will play
A1 6/7 of the time;
A2 1/7 of the time;

p=?

A3 0
of the time;
A4 0
of the time.
Value of the game is: V = 3(6/7) 2 = 4/7
Player A wins the game.
Player B:
Player B
Player
A

Strategy
A1
A2

As Choices
A1
A2

q
B1
1
-2

1-q
B4
0
4

Bs Expected Payoff
q + 0(1 q) = q
-2p + 4(1 - q) = -2q + 4 - 4q = -6q + 4
VA1 = VA4
q = -6q + 4
7q = 4
q = 4/7
1 - q = 1 - 4/7 = 3/7

Optimal Decision: Player B will play

B1 4/7 of the time;
B2 0
of the time;
B3 0
of the time;
B4 3/7 of the time.
Value of the game is: V = q = 4/7
Player A wins the game.