Game Theory

Competitive Game and Game Theory:

A “competitive situation with a finite number of competitors” may termed as a competitive game. A game is a
situation in which two or more players confront one another is pursuit of certain conflicting objectives. Being in
conflict, it is clear that not all players’ objectives can be simultaneously realized. Thus some players may gain and
receive a positive pay off, where as, others may loss and getting a negative pay off.

Classification of Games:
There are basically two major categories of games-
• Games of chance.
• Games of strategy.

Example:
Let k and p be two businessmen working in the same field. There must be some conflicts of interest between

there regarding business matters. In term of mathematical terminology, the businessmen k and p are called

players and the business is called as game.

Properties of Games:
A competitive situation will be called a ‘Game’, if it has the following properties:
• There are a finite number of competitors or participants.
• Each player has a finite number of strategies or alternatives available to him.
• A play of the game takes place when each player employs his strategy.
• Every result of a game is an outcome, i.e. loss or gain or draw.

Zero-sum games and two person zero-sum game:

Games having a ‘zero-sum’ character that the algebraic sum of gains and loss of all the players is zero are called
zero-sum games. Zero-sum games with two players are called two-person zero-sum or rectangular games. In this
case the loss or gain of the one player is exactly equal to the gain or loss of the other.

Example:
Consider, a two-person coin tossing game. Each player tosses an unbiased coin simultaneously player B pays TK
8 to A if  H , H  occurs and TK 5 if T , T  occurs. Otherwise player A pays TK 4 player B. So A ' s pay off

matrix may be displayed as below:

Player B
H T
H 8 -4
Player A
T -4 5
Pay of matrix for B :
Player A
H T
H -8 4
Player B
T 4 -5
This two person game is zero-sum game if pay off matrix A plus pay off matrix B is null matrix.
Game Theory ~ 1 of 13
Properties of Zero-sum Game:
• Only two players participate in this zero-sum game.
• Each player has a finite number of strategies available.
• Each specific strategy results in a pay off.
• Total pay off of the two players at the end of the game must be zero.

Player:
In a game each participant or interested party is called a player.

Pay-off matrix:

( )
A pay off matrix is a real matrix aij ; i = 1(1) m , j = 1(1) n called in general a rectangular matrix, where the

elements a ij indicates the gain of the maximizing player for using ith and jth move if the row and column players

respectively.

Saddle or Equilibrium Point:

A saddle or equilibrium point of a pay off matrix is that position in the pay off matrix, where the maximum of row
minima coincides with the minimum of the column maxima. kr th saddle point is


  
 
a kr = max min aij  = min max aij 
i  j j  i 

Let aij be the m  n pay off matrix for two-person zero-sum game. If v denotes the miximin value and v

denotes the minimax value of the game then v  v

min  max  max  min 

( )
1  j  n 1  i  m
aij  
 
( )
1  j  n aij 
 1 i m  

Rules for determining a saddle point:

We may summarize the procedure of locating the saddle point of a pay off matrix as follows:

Step-1: Select the minimum element of each row of the pay off matrix and mark them (*).
Step-2: Select the greatest element of each column of the pay off matrix and select mark them (+).
Step-3: If there appears an element in the pay off matrix marked (*) and (+) both, the position of that
element is a saddle point of the pay-off matrix.

Value of the game:

The pay off at the saddle point is called the value of the game and is obviously equal to the maximin and minimax
values of the game.

Rules for determining the value of the game:

To determine the value of the game the following steps are taken:
Step-1: At the right of the each row, write minimum element of each row and mark them star (*).
Step-2: At the bottom of the each column, write the maximum element of each column and mark them (+).

Game Theory ~ 2 of 13
 Step-3a: If the two marked element are the same the cell where the corresponding row and column are meet is
the saddle point. If v is the maximin value of the game and v is the minimax value of the game. Then

the value of the game will be vvv

Step-3b: If the two marked element are unequal then we can say that there is no saddle point, so we can not use
this.
Step-3c: If there are more saddle point, then there will be more than one solution corresponding to the saddle
point.

Example:
Player B R min
 −3 6 2 −3
Player A  −1 0 −7  −7
 −2 4 −1 −2
C max −1 6 2

From the matrix we see the v = −2  max imum of R max 

v = −1  min imum of C max 

Strategy:
The decision rule by which a player determine his course of action, this type of decision rule is known as strategy.
There are three types of strategies are as follows

Pure strategy:
A pure strategy is that in which a player decides to use only particular course of action during every play or the
selection of only one single move or strategy by a player ignoring the strategy taken by his opponent is called the
pure strategy.

Mixed strategy:
A mixed strategy is that in which a player decides in advance to use all or some of his available course of action in
some fixed probability. Thus a mixed strategy is a selection among pure strategies with some fixed probability.

Optimal strategy:
In two person zero-sum game if the maximin value of the game is equal to the minimax value of the game then
the corresponding pure strategies are called optimal strategy.

Maximin and Minimax Principle:

Let us consider the two person zero sum game of the player A and B with following m  n pay off matrix for
player A .
Player B
1 2 j n
1  a11 a12 a1 j a1n 
 a2 n 
2  a21 a22 a2 j
 
Player A  
i  ai1 ai 2 aij ain 
 
 
m  am1 am 2 amj amn 

Game Theory ~ 3 of 13
 Player A is always try to maximize his gain. So using the maximin strategy. The maximin strategy for player A
will be
 
i  j 
( )
max min aij  = max row min ima
i

Again player B wishes to minimize his loss using minimax strategy. The strategy will be-


min max aij
j i
( ) = minj column max ima

The principle by which player A and player B select the maximin and minimax strategy respectively is known a
maximin and minimax principle.

Assumption: both the players are conservative.

Explanation of maximin and minimax principle:

To explain the maximin and minimax principle with the following 3  2 pay off matrix for player A
Player B
B1 B2
A1  9 2 
Player A A2  8 6 
 
A3  6 4 

Let the pure strategies of the two players be- S A =  A1 , A2 , A3  , S B = B1 , B2 

Here A wishes to maximize his gain. If he plays strategy A1 , he may gain 9 or 2 depending upon the strategy

chosen by B . However, A can guarantee a gain of at least min ( 9, 2 ) = 2 regardless of the strategy chosen by B .

If A player A2 , he may gain at least min ( 8, 6 ) = 6 and if he plays A3 , he may gain at least min ( 6, 4 ) = 4 .

Since player A would like to maximize his minimum gain he select A2 which gives maximum of the minimum

gain. On the other hand, player B wishes to minimize his losses if he plays strategy B1 his loss will be at most

max ( 9,8, 6 ) = 9 regardless of the strategy taken by player A . If he plays B2 , his loss will be at most

max ( 2, 4, 6 ) = 6 . Player B ' s minimum of the maximum loss called the maximum value of the gain on the

corresponding strategy of the value of minimax value.

We observe from this example that maximum of the row minima is equal to the minimum of the column maxima.
i.e.

i j
 
max ri  = min c j = 6

 
( )
or max min aij  = min max aij
i  j  j i
 ( ) = 6

Game Theory ~ 4 of 13
Theorem:
( )
Let aij be the m  n pay off matrix for a two-person zero-sum game. If v denotes the maximum value and v

min  max  max  min 

the minimax value of the game, then v  v i.e.,  ( )
1  j  n 1  i  m
aij    ( )
aij  .
 1  i  m 1  j  n 

Proof:
We have,

( )
max
aij  aij ; j = 1(1) n
1 i  m

( )
min
aij  aij ; i = 1(1) m
1 j  n

Let the above maximum be attained at i = i  and the minimum be attained at j = j  i.e.

( )
max
aij  aij and
1 i  m

( )
min
aij  aij 
1 j  n

Then we must have aij  aij  aij

From this we get,

( ) ( )
min max
aij  aij  aij 
1 j  n 1 i  m
min  max  max  min 
 
1  j  n 1  i  m
( )
aij    ( )
aij 
 1  i  m 1  j  n 
or v  v

Example:
Determine the range of p and q that will make the pay of element a 22 a saddle point for the game whose pay

( )
off matrix a ij is given below:

Player B R min
2 4 5 2
Player A 10 7 q  7
 4 p 8  4
C max 10 7 8

At first we ignore the value of p and q then determine the row minima and column maxima from the pay off

matrix.
v = Maxi min = 7
v = Mini max = 7
Thus,
p7
q7

Game Theory ~ 5 of 13
Theorem:
Show that for any 2  2 two person zero-sum game without a saddle point having the pay off matrix for A
B1 B2
A1  a11 a12 
A2  a21 a22 

The optimal mixed strategies are

A A2  B B2 
SA =  1 SB =  1
p2  q2 
and
 p1  q1
are determined by –
where
p1 a22 − a21
= p1 + p2 = 1
p2 a11 − a12
q1 + q2 = 1
q1 a22 − a12
=
q2 a11 − a22
and the value of the game
a11a 22 − a 21a12
v=
a11 + a 22 − (a 21 + a12 )

Proof:
A A2 
Let a mixed strategy for player A is given by S A =  1 where, p1 + p2 = 1
 p1 p 2 

If player B moves B1 , then net expected gain of player A will be E1 ( A) = a11 p1 + a21 p2

Again, if player B moves B2 , then the net expected gain of player A will be E2 ( A) = a12 p1 + a22 p2

B B2 
Similarly, if B plays his mixed strategy S B =  1 ; where, q1 + q 2 = 1
 q1 q 2 

Then, B ' s net expected loss will be

E1 ( B) = a11q1 + a21q2 if A palys A1
E2 ( B) = a12 q1 + a22 q2 if A palys A2

The expected gain of player A , when B mixes his moves with probabilities q1 and q2 is therefore given by

E ( A) = q1  a11 p1 + a21 p2  + q2  a12 p1 + a22 p2 

Player A would always try to mix his moves with such probabilities so as to maximize his expected gain. Now,
E ( A) = q1  a11 p1 + a21 (1 − p1 )  + (1 − q1 )  a12 p1 + a22 (1 − p1 )
= a11 p1q1 + a21q1 − a21 p1q1 + a12 p1 + a22 − a22 p1 − a12 p1q1 − a22 q1 + a22 p1q1
=  a11 + a22 − ( a12 + a21 )  p1q1 + ( a12 − a22 ) p1 + ( a21 − a22 ) q1 + a22
 a −a   a −a  a11a22 − a12 a21
=   p1 − 22 21    q1 − 22 12 + ; where,  = a11 + a22 − ( a12 + a21 )
      

Game Theory ~ 6 of 13
 a 22 − a 21 (a11a 22 − a12 a 21 )
If A chooses p1 = , he ensure his expected gain of A is at least . Similarly, if B
 
a 22 − a12 (a11a 22 − a12 a 21 )
Chooses q1 = then B will limit his expected loss at most . These choices of
 
q1 and q2 will thus the optimum strategies of players A and B respectively.

a22 − a21 a11 − a12

 p1 = and p2 = 1 − p1 =
 
a22 − a12 a11 − a21
q1 = and q2 = 1 − q1 =
 

a11 a 22 − a 21 a12
And the value of the game v =

Hence we have,
p1 a22 − a21 q1 a22 − a12
= and =
p2 a11 − a12 q2 a11 − a22
a11a22 − a21a12
v=
a11 + a22 − ( a21 + a12 )

For the game with following payoff matrix determine the optimum strategy and value of the game:
B1 B2
A1  5 1 
A2  3 4 

and strategies for B is S B =  1

B2 
Strategies for A is S A = 
A1 A2  B
 .
 p1 p2   q1 q 2 

Solution:
The expected gain of player A , when B mixes his moves with probabilities q1 and q 2 are given by-

E ( A ) = q1  a11 p1 + a21 p2  + q2  a12 p1 + a22 p2 

= q1 5 p1 + 3 (1 − p1 )  + (1 − q1 )  p1 + 4 (1 − p1 ) 
= 5 p1q1 + 3q1 -3p1q1 + p1 + 4-4p1 -p1q1 -4q1 + 4p1q1
= 5 p1q1 -3p1 -q1 + 4
 1  3  17
= 5  p1 −  q1 −  +
 5  5 5

 = a11 + a22 − ( a12 + a21 )

= 5 + 4 − ( 3 + 1) =5

a22 − a21 4−3 1 4

 p1 = = = and p2 = 1 − p1 =
  5 5
a22 − a12 4 −1 3 2
 q1 = = = and q2 = 1 − q1 =
 5 5 5
17
v =
5

Game Theory ~ 7 of 13
Matrix oddments method for n  n Games:
For n  n games, the method provides an easy method for finding the optimum strategies of the two players. The
method consists of the following steps –

( )
Step-1: Let A = a ij be an n  n pay-off matrix. Obtain a new matrix C , whose first column is obtained from

A by subtracting its 2nd column from 1st;second column is obtained by subtracting A ’s 3rd column from
2nd and so on till the last column of A has been taken care of. Thus C is an n  (n − 1) matrix.

Step-2: Obtain a new matrix R , from A by subtracting its successive rows from the preceding ones, in exactly

the same manner as was done for column in step-1. Thus R is an

(n −1) n matrix.

Step-3: Determine the magnitude of oddments corresponding to each row and each column of A . The oddment
corresponding to ith row of A is defined as the determinant C i , where C i is obtained from C by

deleting its ith row. Similarly, oddment (j th

)
column of A = Ri , where R j is obtained from r by

deleting its jth column.

Step-4: Write the magnitude of oddments (after ignoring negative sings, if any, against their respective rows and
columns).

Step-5: Check whether the sum of row oddments is equal to the sum of column oddments. If so, the oddments
expressed as fractions of the grand total yield the optimum strategies, If not the method fails.

Step-6: Calculate the expected value of game corresponding to the optimum mixed strategy determined above
for the row player (against any move of the column player).

Example: For the game with following pay-off matrix (For without saddle point). Determine the optimum strategy and
value of the game

Solution:
E ( p, q ) = q1 a11 p1 + a 21 p 2  + q 2 a12 p1 + a 22 p 2 
 E ( p, q ) = q1 5 p1 + 3(1 − p1 ) + (1 − q1 )1 p1 + 4(1 − p1 )
= q1 (2 p1 + 3) + (1 − q1 )(4 − 3 p1 )
= 2 p1 q1 + 3q1 + 4 − 4q1 − 3 p1 + 3 p1 q1
= 5 p1 q1 − 3 p1 − q1 + 4
 1  3  17
= 5 p1 −  q1 −  +
 5  5  5
1 4 3 2 17
 p1 = , p2 = , q1 = , q2 = , V=
5 5 5 5 5
We know that
 = a11 + a 22 − (a12 + a 21 )
= 5 + 4 − (3 + 1)
=5

Game Theory ~ 8 of 13
Problem: Use matrix oddment method to solve the following 3 3 game
1 7 2 
 
6 2 7
5 1 6
 
Solution:
We compute the matrices C and R from the given pay-off matrix, and then we obtain the row and column
oddments. Thus we have
 − 6 5
   − 5 5 − 5
C =  4 −5  and R =  
 4 −5   1 1 1
 
The oddments are
4 −5 5 −5
C1 = =0 R1 = = 10
4 −5 1 1
−6 5 −5 −5
C2 = = 10 and R2 = =0
4 −5 1 1
−6 5 −5 5
C3 = = 10 R3 = = 10
4 −5 1 1

The augmented pay-off matrix is

Row oddments
1 7 2 ( 0)
6 7 
 2 (10 )
5 1 (10 )
6 
Column oddments (10) ( 0 ) (10 ) ( 20 )
Since the sum of row and column oddments are both equal to 20, then the optimum strategies are
 1 1 1 1
Row player:  0  and column player:  0 
 2 2 2 2

So, the value of the game is

1 1
G= 7 + 2
2 2
7+2 9
= =
2 2

Linear Programming Method:

Statement:
Every game problem (two-person zero some game) can be converted to a linear programming problem.

Proof:
( )
Let us consider an m  m pay-off matrix a ij for player A , where a ij  0  i, j .

 A1 A2 . . . Am   B1 B 2 . . . B n  m n
Let, S m =  
 p1 p 2 . . . p m 
and S n =   ; where,
 q1 q 2 . . . q n 
 p = q
i =1
i
j =1
j =1

These are the mixed strategies for player A and B respectively.

Game Theory ~ 9 of 13
 Then, the expected gains g j ( j = 1(1)n) of player A against B ’s pure strategies will be

g 1 = a11 p1 + a 21 p 2 +  + a m1 p m
g 2 = a12 p1 + a 22 p 2 +  + a m 2 p m
  
g n = a1n p1 + a 2 n p 2 +  + a mn p m

and the expected losses l i (i = 1(1)m ) of player B against A ’s pure strategies will be

l i = a11 q1 + a12 q 2 +  + a1n q n

l 2 = a 21 q1 + a 22 q 2 +  + a 2 n q n
  
l m = a m1 q1 + a m 2 q 2 +  + a mn q n

The objective of player A is to select p i (i = 1(1)m) such that he can maximize his minimum expected gains;

and the player B desires to select q j ( j = 1, 2, ........,n) that will minimize his expected losses.
Thus if we let,
m
u = min  aij pi ( j = 1, 2,  , n) and v = max  a ij q j (i = 1, 2, ............, m)
j i
i =1

The problem of two players could be written as

m
pi

1
For player A : Maximize u = Minimuze =
u i =1 u
m
Subject to constraints  aij pi  u and  pi = 1 , p i  0 (i = 1, 2,  , m)
i =1

n q
=
1 j
For player B : Minimize v = Maximize
v j =1 v

n
Subject to constraints a
j =1
ij q j v and q j = 1 , q j  0( j = 1, 2, ............, n )

General rules for dominance:

 If all the elements of a row, say kth are less than or equal to the corresponding element s of any other row,
say rth, then kth row is dominated by rth row.

 If all the elements of a column, say kth are greater than or equal to the corresponding elements of any other
column, say rth, then kth column is dominated by the kth column.

 Dominated rows or columns may be deleted to reduce the size of pay-off matrix, as the optimal strategies
will remain unaffected.

Problem: Let us consider the two-person zero sum game in the following pay-off matrix.
Player B
B1 B2 B3 B4
A1  5 − 10 9 0 
 
A2 6 7 8 1
Player A  8 7 15 1 
A3
 
 3 4 −1 4
A4  
Is it stable? Find the value of the game.
Game Theory ~ 10 of 13
Solution:
 5 − 10 9 0 
 
6 7 8 1
Here, 
8 7 15 1 
 
 3 4 −1 4
 

Since maximum value of row minima & the minimum value of column maxima are not equal, so it is easily
verified that there is no saddle point and hence it is not saddle. For solving this problem we can use dominance
principle.

Let us consider, player A ’s moves first. Since all the elements of 1st and 2nd row are less than or equal to 3rd row.
So by dominance principle 1st and 2nd row are dominated by 3rd row.

Therefore the reduced pay-off matrix becomes

Player B
8 7 15 1
Player A  
3 4 −1 4 

Again since all the elements of 2nd column are greater than or equal to the corresponding elements of the 4th
column, so 2nd column is dominated by 4th column, and we dropped 2nd column.

Therefore the reduced pay-off matrix becomes

Player B
 8 15 1 
Player A  
 3 −1 4
Now, we observed that no row (or column) dominates another row (or column). So we can use convex
combination.
1 1
i.e. 15  + 1 = 8  8
2 2
1 1
 − 1 + 4  = 1.5  3
2 2
Here, a convex combination of B ’s 2nd and 3rd strategies dominates his first strategy.

Therefore B ’s first move can be deleted yielding the 2 2 pay-off matrix.

Player B
 15 1
Player A  
 −1 4 

a11 − a21 4 +1 5
Now, strategies p1 = x = = =
a11 + a22 − ( a12 + a21 ) 15 + 4 − 0 19
a22 − a12 4 −1 3
q1 = y = = =
a11 + a22 − ( a12 + a21 ) 19 19
3 16
q2 = 1 − y = 1 − =
19 19
and the value of the game,

a11a22 − a12 a21 15  4 − 1 ( −1) 61

V= = =
a11 + a22 − ( a12 + a21 ) 19 19

Game Theory ~ 11 of 13
Graphical Method:
The graphical method is useful for the game where the pay-off matrix is of the size 2  n or m  2 . i.e., the game
with mixed strategies that has only two pure strategies for one of the players in the two person zero-sum game.

Let us consider the following 2  n pay-off matrix of a game without saddle point :
Player B
 a11 a12  a1n 
Player A  
 a 21 a 22  a 2 n 

Let the mixed strategy for player A be given by

A A 
SA =  1 2  ; Where p1 + p 2 = 1 and p1  0, p 2  0
 p1 p 2 

Now, for each of the pure strategies available to B , expected pay-off for player A would be as following:

B' s pure move A' s exp ected pay-off E(p)

B1 E1 ( p ) = a11 p1 + a 21 p 2
B2 E 2 ( p ) = a12 p1 + a 22 p 2
 
Bn E n ( p ) = a1n p1 + a 2n p 2

The player B would like to choose that pure move b j against S A for which E j ( p ) is a maximum for

i = 1, 2,  , n . Let us denote this minimum expected pay-off A by


v = min E j ( p ): j = 1, 2,  , n 

The objective of player A is to select p1 and p 2 in such a way that v is as large as possible. This may be

denoted by plotting the straight lines.

E j ( p ) = a1 j p1 + a 2 j p 2
= a1 j p1 + a 2 j (1 − p1 )
= a1 j p1 + a 2 j − a 2 j p1
( )
= a1 j − a 2 j p1 + a 2 j ( j = 1, 2,  , n)

as a linear function of p1 .

The highest point on the lower boundary of these lines will give maximum expected pay-off among the minimum
expected pay-off on the lower boundary and the optimum value of probabilities p1 and p 2 .

Now, the two strategies of player B corresponding to those lines which pass through the minimum point can be
determined. It helps in reducing the size of the game to 2 2 .

Game Theory ~ 12 of 13
Solve the 2  3 game graphically:
Player B
1 3 11
Player A 8 5 2 
 

Solution:
Since the problem does not passes any saddle point, so we can use graphical method.

A A2 
SA =  1 p 2 = 1 − p1
p 2 
Let the mixed strategy for player A against player B ,
 p1
The expected pay-off against B ’s pure moves are given by
B' s pure moves A' s exp ected pay − off E ( p1 )
B1 E1 ( p1 ) = p1 + 8(1 − p1 ) = −7 p1 + 8
B2 E 2 ( p1 ) = 3 p1 + 5(1 − p1 ) = 2 p1 + 5
B3 E 3 ( p1 ) = 11 p1 + 2(1 − p1 ) = 9 p1 + 2

From this above pay-off results we see a linear function of p1 .

This expected pay-off equations are then plotted as function of p1 as shown in the following figure, which shows

the pay-off each column represented as points on two vertical axis 1 and 2, unit distance apart. Line joining the
pay-off on axis 1 with the pay-off on axis 2, then represents each of B ’s strategies.

Since the player A wishes to maximize his minimum expected pay-off, we consider the highest point of
intersection H on the lower envelope of A ’s expected pay-off equations.

This point H represents the maximin expected value of the game for A . The lines B 2 and B 3 , passing through

H , define the relevant moves B 2 and B 3 that alone B needs to play.

The solution to original 2 3 game with 2 2 pay-off matrix

B 2 B3
A1 3 11
5 2 
A2  

A A2  B B2 B3 
Now, if S A =  1 p1 + p 2 = 1 & SA =  1 ; q1 + q 2 = 1
 p1 p 2  0 q1 q 2 

Then using the usual method of solution for 2 2 games, the optimum strategies can easily be obtained as-
 A1 A2   B1 B 2 B3 
SA =  3 8 & SA =  2 9 
   0 11 11
 11 11 
and the value of the games,
a11a22 − a21a12
v=
a11 + a22 − ( a12 + a21 )
3  2 − 11 5 6 − 55 49
= = =
3 + 2 − (11 + 5 ) 5 − 16 11

Game Theory ~ 13 of 13