TITLE OF THE PROJECT

A PROJECT REPORT SUBMITTED IN PARTIAL FULLFILLMENT OF THE

DEGREE OF BACHELOR OF SCIENCE
BY
(Group -B )
Name Of The Students Roll No. Regd. Number
1. Ramesh Chandra Panda 5603H17013 15474/17
2. Soumya Ranjan Nayak 5603H17011 15471/17
3. Soumyaranjan Nayak 5603H17005 15452/17
4. Kalakar Nayak 5603H17008 15460/17
5. Jyotisankar Dash 5603H17014 15483/17
6. Deepak Kumar Jena 5603H17018 15487/17
7. Sanjay Malik 5603H17003 15437/17
8. Satyajit Barik 5603H17024 15570/17

Under The Guidance of

Mr. Parameswar Panda
Lecturer Dept. of Mathematics

(2019-20)

A.B. COLLEGE, BASUDEVPUR, BHADRAK

FAKIR MOHAN UNIVERSITY, BALASORE
 ACADEMIC YEAR 2019-20
DEPARTMENT OF MATHEMATICS
A.B. COLLEGE, BASUDEVPUR, BHADRAK
SEMESTER-VI
PROJECT REPORT EVOLUTION

Dissertation Presentation Viva Voce Total

Name of the students Roll No. Regd. No. 60 marks 25 marks 15 marks 100
marks
Ramesh Chandra Panda 5603H17013 15474/17
Soumya Ranjan Nayak 5603H17011 15471/17
Soumyaranjan Nayak 5603H17005 15452/17
Kalakar Nayak 5603H17008 15460/17
Jyotisankar Dash 5603H17014 15483/17
Deepak Kumar Jena 5603H17018 15487/17
Sanjay Malik 5603H17003 15437/17
Satyajit Barik 5603H17024 15570/17

Signature of internal Signature of external

-------------------------------------- ----------------------------------------
 DECLARATION

We the following students do hereby certify that the project report entitled, "GAME
THEORY AND ITS APPLICATION" being submitted to Atal Bihari College, Basudebpur,
Bhadrak, Odisha, for the award of Bachelor of Science, is an original peace of work has not
been submitted elsewhere for any other academic degree or diploma to this college or any
other college/university.

NAME OF THE STUDENTS SIGNATURE

1. Ramesh Chandra Panda----------------------------------

2. Soumya Ranjan Nayak-----------------------------------

3. Soumyaranjan Nayak------------------------------------

4. Kalakar Nayak--------------------------------------------

5. Jyotisankar Dash-----------------------------------------

6. Deepak Kumar Jena-------------------------------------

7. Sanjay Malik----------------------------------------------

8. Satyajit Barik---------------------------------------------
 ACKNOWLEDGEMENT
With Limitless humility we would like to thank God the supreme and merciful for his blessing
towards us with all favourable circumstances to go through this arduous task.

We express Our Sincere and hearty gratitude to madam Sujata Mohapatra (HOD)Sr. Lecturer
Department of Math. A.B. College, Basudevpur for her constant and cordial support and
guidance during the preparation of our project. She is not only our guide and mentor but also
torch bearer in this journey.

We exult to acknowledge our sincere thanks to our principal Dr.Ramachandra Palai of

our college. Who also belongs to our mathematics department of AB college, Basudevpur
his guidance and support in our project work. We will never forget his valuable suggestion
and rendering constant guidance during this work.

We are also highly indebted to our lecture Mr.Parameswar Panda. (Dept. of Math.) for his
unconditional support and encouragement during our project work.

lt is our pleasure to express our sincere thanks to our parents who not only extended there
support but also extended financial help.

Finally I thanks to our groupmate for our collective co-operation and to complete the project
Work successfully.

1.

2.

3.

4.

5.

6.

7.

8.
 ABSTRACT
In this article we present an overview on two person zero-sum games, which play a central
role in the development of the theory of games two person zero-sum game is a special class
of game theory on which one player’s wins that the other players loses with only two
players , it is difficult to solve two person matrix game with the order m*n (m>=3,n>=3).
The aim of the article is to determine the method on how too solve a two person matrix
game by linear programming function.
Lin-progm( ) in MATLAB with linear programming techniques on the mat lab software,
we present effective method for solving large zero-sum games problem.
The concept of game theory was developed by professor John Von Newman and Oscar
Morgenstern when they published a book “The theory of games and economic behaviour”.
Game Theory is now widely used in economic, business, administration and in many
humanity disciplines.
It is a useful scientific approach to rational decision making. When decisions have to be
made under conditions of uncertainty, two or more opponents are involved and each one
wants to optimize decision in his favours at the cost of other, game theory plays a vital role.
In game theory the two opponents are known as players.Each has finite or infinite number
of alternatives or strategies. Each player pays something to other which is called pay-off.
CHAPTER – 1(INTRODUCTION)
In his chapter it given a synoptic idea about the uses of Game Theory in various fields
of our daily life.
CHAPTER – 2
In this chapter, history, uses of Game Theory in all field being discussed. In literature
survey the books, journals of the mathematician have been reviewed The focus of different
works have been highlighted.
CHAPTER – 3
In this chapter a zero sum game and its mathematical representation of a situation in
which each participant gain or loss of utility is exactly balanced by loss or gain of utility of
other participants have been highlighted.
CHAPTER – 4
In this chapter the two person zero sum game has been discussed in which using two
players how the sum of payoffs to each player is constant for all possible outcomes for the
game are highlighted such games are sometime called constant-sum of games.
CHAPTER - 5
In this chapter finding of the work is presented with a great hope and expectation.
 CONTENTS
 DECLARATION
 CERTIFICATE
 ACKNOWLEDGEMENTS
 ABSTRACT
 LIST OF TABLE
 LIST OF FIGURE
 CHAPTER-1
 INTRODUCTION
 CHAPTER-2
 HISTORY AND LITARTURE SURVEY
 CHAPTER-3
 ZERO SUM GAME
 CHAPTER-4
 TWO PERSON ZERO SUM GAME
 CHAPTER-5
 CONCLUSION/FUTURE WORK
 BIBLOGRAPHY
 LIST OF TABLES
JOHN VON NEUMANN
Born-28 December 1903
Died-8 February 1957
John von Neumann has played an important role in post-war economic theory. He published
“Theory of Games and Economic Behaviour” in 1944 which detailed a ground-breaking
mathematical theory of economic and social organization, based on a theory of games
strategy.

JOHN NASH
Born- 13 June 1928
Died- 23 May 2015
John Nash was American mathematician who has awarded the 1994 Nobel Prize for
economics for his landmark work, first begun in the 1950s, on the mathematics of game
theory.
LIST OF FIGURE

JOHN NASH JON VON NEUMANN

 CHAPTER-1
Introduction:
Application Of Game Theory.
‘Game Theory’ is a mathematical concept, which deals with the formulation of the correct
strategy that will enable an individual or entity (i.e., player), when confronted by a complex
challenge, to succeed in addressing that challenge. It was developed based on the premise
that for whatever circumstance, or for whatever game, there exists a strategy that will allow
one player to 'win'. Any business can be considered as a game played against competitors, or
even against customers. Economists have long used it as a tool for examining the actions of
economic agents such as firms in a market.
The ideas behind game theory have appeared through-out history [1], apparent in the bible,
the Talmud, the works of Descartes and Sun Tzu, and the writings of Charles Darwin [2].
However, same argue that the first actual study of game theory started with the work of
Daniel Bernoulli, A mathematician born in 1700 [3]. Although his work, the Bernoulli's
Principles formed the basis of jet engine production and operations, he is credited with
introducing the concepts of expected utility and diminishing returns. Others argue that the
first mathematical tool was presented in England in the 18h century, by Thomas Bayes,
known as "Bayes' Theorem"; his work involved using probabilities as a basis for logical
conclusion [3]. Nevertheless, the basis of modern game theory can be considered as an
outgrowth of a three seminal works a "Researches into the Mathematical Principles of the
Theory of Wealth" in 1838 by Augustin Cournot, gives an intuitive explanation of what
would eventually be formalized as Nash equilibrium and gives a dynamic idea of players best-
response to the actions of others in the game. In 1881, Francis Y. Edgeworth expressed the
idea of competitive equilibrium in a two-person economy. Finally, Emile Borel, suggested
the existence of mixed strategies, or probability distributions over one's actions that may lead
to stable play. It is also widely accepted that modern analysis of game theory and its modern
methodological framework began with John Von Neumann and Oskar Morgenstern book
[4].
We can say now that "Game Theory" is relatively not a new concept, having been invented
by John von Neumann and Oskar Morgenstern in 1944 [4] At that time, the mathematical
framework behind the concept has not yet been fully established, limiting the concept’s
application to special circumstances only [5]. Over the past 60 years, however, the
framework has gradually been strengthened and solidified, with refinements ongoing until
today [6] Game Theory is now an important tool in any strategist's toolbox, especially
when dealing with a situation that involves several entities whose decisions are influenced
by what decisions they expect from other entities.
 CHAPTER-2
HISTORY
Theory of games started in the 20th century. The mathematical treatment of games was
developed when John Von Neumann and Morgenstern published with their work
"Theory of Games and Economic Behaviour" in 1944. The approach to competitive
problems developed by J. Von Neumann (known as the father of game theory) utilizes the
minimax principal which involve the fundamental idea of minimization of the maximum
loss or the maximization of the minimum gain. The game theory is capable of analysing
simple competitive situations, it can not handle all the competitive situations that may arise.
Though the title of originator is given to mathematician John von Neumann, the first to
explore this matter was a French mathematician named Borel. In the 1930s, Neumann
published a set of papers that outlined the tenets of game theory and thus made way for the
first simulations which considered mathematical probabilities. This was used by strategists
during the Second World War, and since then has earned game theory a place in the
context of Social Science.
It may at first seem arcane to involve mathematics in something that seems purely based on
skill and chance, but game theory is in actuality a complex part of many branches of
mathematics including set theory, probability and statistics, and plain algebra. This results
from the fact that games are dictated by a given set of rules that can be used to outline a set
of possible moves which can be ranked by desirability and effectiveness, and with
information available, such a set can also be constructed for the opponent, thus allowing
predictions about the possible outcomes within a certain number of moves with probabilistic
accuracy.
The first known discussion of game theory occurred in a letter believed to be written in
1713 by Charles Waldegrave, an active Jacobite and uncle to James Waldegrave, a British
diplomat.2 The true identity of the original correspondent is somewhat elusive given the
limited details and evidence Discussions of two-person games began long before the rise of
modern, mathematical game theory. available and the subjective nature of its interpretation.
One theory postulates Francis Waldegrave as the true correspondent, but this has yet to be
proven. In this letter, Waldegrave provides a minimax mixed strategy solution to a two-
person version of the card game le Her, and the problem is now known as Waldegrave
problem. In his 1838 Researches sur les principles mathématiques de la théorie des richesses
(Researches into the Mathematical Principles of the Theory of Wealth), Antoine Augustin cournot
considered a duopoly and presents a solution that is the Nash equilibrium of the game.
Game theory did not really exist as a unique field until John von Neumann published the
paper On the Theory of Games of Strategy in 1928. Von Neumann's original proof used
Brouwer's fixed-point theorem on continuous mappings into compact convex sets, which
became a standard method in game theory and mathematical economics. His paper was
followed by his 1944 book Theory of Games and Economic Behaviour co-authored with Oskar
Morgenstern. The second edition of this book provided an axiomatic theory of utility, which
reincarnated Daniel Bernoulli's old theory of utility (of money) as an old theory of utility (of
money) as an independent discipline. Von Neumann's work in game theory culminated in
this 1944 book. This foundational work contains the method for finding mutually consistent
solutions for two-person zero-sum games. Subsequent work focused primarily on
cooperative game theory, which analyzes optimal strategies for groups of individuals,
presuming that they can enforce agreements between them about proper strategies.
 CHAPTER-3
ZERO SUM GAME
In game theory and economic theory, a zero-sum game is a mathematical representation of a
situation in which each participant's gain (or loss) of utility is exactly balanced by the losses
(or gains) of the utility of the other participant(s). If the total gains of the participants are
added up and the total losses are subtracted, they will sum to zero, Thus cutting a cake,
where taking a larger piece reduces the amount of cake available for others, is a zero-sum
game if all participants value each unit of cake equally (see marginal utility).
In contrast, non-zero-sum describes a situation in which the interacting parties' aggregate
gains and losses can be less than or more than zero, A zero-sum game is also called a
strictly competitive game while non-zero-sum games can be either competitive or non-
competitive. Zero-sum games are most often solved with the minimax theorem which is
closely related to linear programming duality, or with Nash equilibrium.
The zero-sum property (if one gains, another loses) means that any result of a zero-sum
situation is Pareto optimal (generally, any game where all strategies are Pareto optimal is
called a conflict game).
Zero-sum games are a specific example of constant sum games where the sum of each
outcome is always zero. Such games are distributive, not integrative; the pie cannot be
enlarged by good negotiation.
Situations where participants can all gain or suffer together are referred to as non-zero-sum.
Thus, a country with an excess of bananas trading with another country for their excess of
apples, where both benefit from the transaction, is in a non-zero-sum situation. Other non-
zero-sum games are games in which the sum of gains and losses by the players are
sometimes more or less than what they began with.

The idea of Pareto optimal payoff in a zero-sum game gives rise to a generalized relative
selfish rationality standard, the punishing-the-opponent standard, where both players
always seek to minimize the opponent's payoff at a favourable cost to himself rather to
prefer more than less. The punishing-the-opponent standard can be used in both zero-sum
games (i.e. warfare game, Chess) and non-zero-sum games (i.e. pooling selection games).

For two-player finite zero-sum games, the different game theoretic solution concepts of
Nash equilibrium, minimax and maximin all give the same solution, If the players are
allowed to play a mixed strategy. the game always has an equilibrium.
Applications:
Zero-sum game are found in game theory, but are less common then non-zero sum games.
Poker and gambling are popular examples of zero-sum games since the sum of the amounts
won by some players equals the combined losses of the others.
 CHAPTER - 4

Two Person Zero Sum Games

The first type of game that we will be looking at are those that involve only two
players. This can be a game or situation that is between two humans, a human and
a computer or human versus nature. Whoever is involved in the game will not take
away from the main goal of the game, which is to play such that they are coming out
with the best possible outcome no matter the circumstances. This is why it is
important when playing a game, to play strategically. For the most part, players will
be facing opponents who are rational in game play and hence they need to evaluate
the actions they are able to take in a game. To create an optimal outcome, players
need to look at their strategies. There are two types of strategies that we will be
studying, these include pure and mixed strategies. It is important to understand the
difference between these two types. In this chapter, the primary sources used were
[1], [3] and [4].

1. Pure stra tegies

First we will be looking at pure strategies, which are the most basic of the two
types and then we will continue on to mixed strategies.

DEFINITION 3.1. A Pure Strategy defines the specific action a player takes,
no matter the situation of the game. Pure strategies are not random and the player
does not change their actions during the game.

Consider the situation where you are playing the simple game of rock, paper,
scissors. The rules are simple, each player has three choices to choose from in an
attempt to defeat their opponent; rock, paper or scissors. The outcomes of the game
are; paper beats rock, rock beats scissors and scissors beat paper. A player either wins,
losses or ties. If a player were to play a pure strategy of rock every time it would most
likely not be beneficial for them in this type of game. As we have stated before, it is
assumed that in a game we are playing against a rational player. If you are playing
rock every single turn, most likely your rational opponent will catch on to this pure
strategy and play accordingly, hence choosing paper. In situations or games such as
rock, paper, scissors it is beneficial for a player to play a mixed strategy, which we will
discuss in section 2 of this chapter.

DEFINITION 3.4. An outcome of a matrix game (with payoffs to the row player)
is called a saddle point if the entry at that outcome is both less than or equal to
any entry in its row, and greater than or equal to any entry in its column.

This strategy has players looking at what their best response would be to what their
opponent may play and also their own choices. If we have a payoff matrix game repre -
senting a normal form game, and we have found an element where aij is the
maximum of all of the minimums of all the rows and it is also the minimum of all of
the maximums of the columns, then is a saddle point for the game.
Chapter 4. Two Person Zero Sum Games 7
It is an easy process to find a saddle point within a game, if it does exist. A
player will begin by writing down the minimum entry for each row. From these
minimum entries choose the maximum entry, as done in the table Finding Saddle Points
in a Game. This is called the maximin. The next step is to look at the columns and write
down the maximum entry for each column. Next choose the minimum entry of these
column maximums. This is called the minimax. If the maximin of the rows and the
minimax of the columns are equal, then they appear at the saddle point strategies for
the players. If the maximin and minimax are not equal, then there is not a saddle point
in the game. In the table Finding Saddle Points in a game the saddle point occurs are
the outcome AA.
TABLE 1. Finding Saddle Points in a Game

Player 2
A B C Min
2 4 3 2
lay

1 -10 5 -10
-1 6 -8 -8
Max 2 6 5

When a game contains a saddle point, then along with it is an important

principle called the saddle point principle. It is also worthy to note that the saddle point
will be the same for both players, and hence why both players should play a strategy
that involves the saddle point if it does exist.
DEFINITION 3.5. Saddle Point Principle: If a matrix game has a saddle
point, both players should play a strategy which contains it.

If a saddle point exists within a payoff matrix game, then this saddle point
strategy will find what is known as the value of the game.

1.1. V alue of t he Game, P ur e s tr a te gy.

DEFINITION 3.6. For any matrix game if there is a number v such that player A has
a strategy which guarantees that she will win at least v, and player B has a strategy
which guarantees that player A will win no more than v, then v is called the value
of the game.

If the value of the game exists, then a player can guarantee themselves an outcome
of at least v. If a player does not play the saddle point strategy they are risking an
outcome that is inferior to v and their opponent can possibly have an outcome with a
value better than v. In a non-zero sum game a player would obviously want their
opponents outcome to be at max v because if it is any higher than they are losing from
their payoff of the game.
 2. Mixed Strategy
Until this point we have looked solely at pure strategies, but what if there is not
a saddle point strategy or dominant strategy to a game? Then a player will want to
create what is called a mixed strategy.
DEFINITION 3.8. A plan, which involves playing a mixture of strategies according
to certain fixed probabilities is called a mixed strategy.
Instead of playing the same choice every turn, a player may want to play a mixture
of choices that will optimize their overall outcome and overall payoff while playing a
game. Now, let us suppose that we are looking at a basic 2 by 2 game, where there are
no pure strategies within the game. Hence, we want to find a mixed strategy for the
game.
In games where a player is playing a mixed strategy, they want to play a choice
x percentage of the time, which they have calculated will have the best possible outcome
of their game and another choice x — 1 percentage of the time (For a basic 2 by 2
matrix). How would we find this players mixed strategy, such that it is optimal in a
payoff matrix game? One way is to calculate the following algorithms;
Example-1
The pay-off matrix of a game is given below. Find the solution of the game to A and B.
B
I II III IV V

I -2 0 0 5 3

II 3 2 1 2 2
A
III -4 -3 0 -2 6

IV 5 3 -4 2 -6

Sol. To find the saddle point, circling the row minimum and putting squares around the
column maximums, we get the following table:
B

I II III IV V

-2 0 0 3 -2
I 5
II 3 2 1 2 2 1 v (MAX VALUE)
A
III -4 -3 0 -2 6 -4
IV
5 3 -4 2 -6 -6
COULMN
MAXIMUMS
5 3 1 5 6

v (MIN. VALUE)
Obviously, the matrix has a saddle point at the position (2,3). Thus the solution to the game
is given by
(i) The best strategy for plays A is II.
(ii) The best strategy for plays B is III.
and (iii) The value of the game is 1 for A and -1 for B.

Example-2
Solve the following game :
B

I II III
I 6 8 6
A
II 4 12 2

Sol. To find the saddle point, circling the row minimums and putting square around the
column maximums, we get the following tables:
B

I II III

I 6 8 6 6 6 Vi(MAX VALUE)
A
II 4 12 2
COULMN
6 12 6
MAXIMUMS

v (MIN. VALUE)
Obviously, the matrix have two saddle points at (1,1) and (1,3). Thus the solution to the game
is given by
(i) The best strategy for player A is I.
(ii) The best strategy for player B is II.
(iii) The value of the game is 6 for A and -6 for B.
Example-3
Solve the problem with the pay-off matrix.
Player B

1 -2 5 -3 6 7
2 4 6 8 -1 6
Player A
3 8 2 3 5 4
4 15 14 18 12 20

Sol:
Find min of each row
Row Min Value
1 -3
2 -1
3 2
4 12
Maximum of {-3, -1, 2, 12} = 12
Find max of each column
Column Max Value
I 15
II 14
III 18
IV 12
V 20
Minimum of (15, 14, 18, 12, 20) = 12
Game has saddle point. So the common value V = 12
Best strategy for players A is strategy 4.
Best strategy for players B is strategy IV.
The game is favourable for player A.
 CHAPTER-5

CONCLUSION

In this paper, we examined two types of games that are involved within game theory,
zero sum and two-person zero sum games. In both of these games we studies zero-sum
and two person sum games and some of the strategies that we may apply to games to have
the best outcome in our play. We studied rational play between two players and
concluded that players should play their pure or mixed strategy that will give them
the value of the game. We then applied some of these strategies, such as the dominance
and saddle point strategies, into basic games and were able to find the value of the
games through the use of algorithms and basic steps. Next, we researched games where
we were not playing games against a rational opponent, but rather games against
nature.
Following this, we studied equilibrium and more importantly Nash Equilibrium, from
which we can take away the ability to apply mathematics with the study of human in -
teractions. Additionally we researched some important terms such as pare to optimal and
non-pare to-optimal and in order for the equilibrium to be a solution to the game it must
have been pare to-optimal.
Until the point of equilibrium, we had focused solely on two-person games. We then
expanded our research into n-person games and characteristic function form. Within this
part of our studying we looked at imputations, domination and stable sets. Lastly
in n-person games we studied the solution concept of the core. This tol d us that if we
can find an imputation within our core that does not have any imputation or coalition
that dominates it then this is the solution to our game.
 Bibliography
 1913-E. Zermelo provided the first theorem of game theory
 asserts that chess is strictly determined
 1928- John von Neumann proved the minimax theorem
 1944 - John von Neumann/Oskar Morgenstem's wrote "Theory of Games and
Economic Behavior"
 1950-1953, John Nash describes Nash equilibrium
 1972- John Maynard Smith wrote "Game Theory and The Evolution of Fighting"