G am e T h eo ry

Ga me is an activity bet wee n two or

mo re ind ivid ual s bas ed on set of rule
at the end of wh~ch one gets benefits s,
and oth er suffers los s.
• Gam e the ory is a decision theory
in wh ich two inte llig ent opp one nts
conflicting objectives are tryi ng to do wit h
bet ter tha n oth er. Eac h pla yer act s
maximize his gai n or min imi ze loss. to

~ trat egy
• Str ate gy is a set of rule s tha t spe
cifies num ber of alte rna tive s or stra
sho uld be ado pte d at eac h pla y. teg ies

~ off
J1 • Pay-off is a me asu re of satisfa
ction a pla yer get s at the end of
pay-off is ass oci ate eac h gam e,
d wit h strategies.
O wo-person, zero sum gam e
• A gam e wit h onl y two pla yer is
cal led "two-E_erson, zer o sum gam e"
_a gai n by one pla yer ~ 1 bec aus e
los s to the--Gther.
-• It is also kno wn as re~tan gul ar
gam e. Sin ce it can be r~p res ent ed
ma trix in rec tan gul ar for m. J:or exa by pay -of f
mp le,
Let A and B are two pla yer s wit h m
and n stra teg ies res pec tive ly.
The gam e can be rep res ent ed by pay
-of f ma trix to pla yer A as sho wn .

(6 - 1)
 u m Game
.pers~n z e ro -S .
~

f~~Jsir1a·1 Ma·nageme'ttt o m ax im u m pay.off

. to rw teD'V th at gi ve
s to ~~
Optimal 501u t1 on
. is the stra 01
6.1 . ,,1J so 0n lu t1 or
e m or e th an o n e st ra te gi es acc0 d
• Th e op tin ' . Iv r ingl
·1ayer. . ay invo
P lutwn 111 . Let the
• An optimum so fo r op ti m al st ra te gi es two pl
bilities. . . is us ed hi l
. w e player B ay~
•r
spec1 1c P ro ba h g am
. . ax principle ts to m ax im iz e t e ll ed maximi %
wa ,
•. M axim i11-m m 11 11 e st ra te g y ca
an es th
d B• Player SA w la ye r A us n stra~.
are A an (V ).
es. do , !ximin va lu e . ax v 1 ... .
minimize the !ass . mim
e va lu e is ca lle m eg y an d th e va lu e 1s ca ll ed m a ue (~.
.ind th . . trat
nunax s
• Player B uses nu tr
es are equal i.e. n d in g op ti m al s ategy
When the two valu minimax value, th e co rr es p o
. . _
va 1 ue -
( max . 1!!1 m d ..
dl e po in t. in is b as ed o n m ax im in an mUU:
ad ax im

U
minimax an d m
The ;election o f or st
I
re su ts.
be st of th e w
rinciple. It ensures f- m at ri x w h er e th e max
imum of
f pa y- of r
t is a position o n o f m ax im a0
e
• A saddle poin um o f co lu m
w it h the m in im pay-oi
minima coincides m e. )
lled value of ga
saddle point is ca is shown.
y-off matrix o f two players A and B
{O Example 6.1.1 :
The pa
Player B

-2 9 -3
8
5 6 8
Player A 6
4 -9 5
I
-2
.
ria find the best st rategy for each player
Using minimax crite
Solution :
Player B
Row;ninimum
I II Ill IV ,/ .

Player A I -3
s -2 9 -3
.;;J._
I

. maximini Y
saddle II 6 [01 6 8
point Ill -2 4 -9 5
8 5 9 8 j
column maximum
.f .
, ,. .--~ minimax iJ
· M ax im in,; -y _ ax (-3 5 - 9) - .5.
__/' - m (B 5, , -
M ir nm ax V =
min I I 9, 8) : 5
- .,. . .
lndust rlal Man~ elrien t 6-3 Game Theory
,.
..-. Saddle point of the game = 5
Pl,,yer A in action 1 may loose 3 points, if he chooses action II, he
wins 5 points
·n action HI he loose 9 points . Therefore to minimize his maxim um
,1lll:I l ( loss playe r A
would choose action ll. Similarly for player B the chances of winni ng
are 8, 5, 9 and 8.
, to minimize his maximum loss player B would choose action-II
Tl,ere fore ·
Tl,e value of game or saddl e point is 5.

f Solution of Mixed Strategy Gam e~

• The pay-off matrix with a saddl e point has a stable soluti on and
value of the
game is given by saddl e element. The solution exists with pure
strategies.
QVhen there is no ~addle poi~t, the value of the game has to
be found by
using concept of mixed strategies)
• Mixed strategies game can be solve d by any of the two metho ds.
1. Graphical solutio~ l~
2. Linear Programming \
6.2.1 Graphical Solution of Games
• Graphical solution is suitab le for games in which at least
one playe r has
eaxctly two pure strategies. Saddl e point can be obtain ed graphically
.
• Suppose layer A has two mix strategies A and A with proba
1 2 bilitie s x1 and
(1 - x1). Where, 0 ~ x1 s 1. Player B mixes strate gies B
1 to Bn with
probabilities y 1, y2, ....... . Yn· The optim al strate gies \A{ith (2 x n)
or (m x 2)
matrix game is repre sente d a_s show n below . ·
--,.___
Player B

Y1 Y2 Yn
B1 82 ~· Bn
X1 A1 8 11 8 12 8 1m
Player A
(1 - X1) A2 8 21 8 22 8 2m
,
• A's expec ted pay-o ff corre spond ing to B's jth pure strate gy is
given by
(a 1i - a 2i) x1 + a 2i where , j = 1, 2, 3..........n.
• Player A deter mines x that maxim izes the minim um expec ted
1 pay-offs.
max m~n !(a1i - a 2i)x 1 + a 2il
x1 J
8t0 Ps for drawing solutions

i) Draw two axes vertic ally at a distan ce paral lel to each other.

~
~
 6- 4
In
gement
Industrial Mana
P(x 2)) an d X2 = (1
ii ) The mix str
ntcgies are [P(x 1) d r
is th en llse
is solved . r n fu nc tio n of x1 . Th is gr ap h 'Or
ctcd pay-off as d pa y- o ff.
iii) Plo t the exne ,.im ize s the m in im um ex pe cte
in t tha t ma
ha de d bou
identifying the po po in t of th is s
es t bo un da ry an d the hi gh es t iti ca l m ov es of pl "YerOdan~,
I\') Shade the
low
M, wh ich sh ow s th e tw o cr
point
·ves ~he n ximum plnyer A.
trix. Pay-o ff is for
: Co nsi der the 2 x 4 game ma
ampl ·
Player B
84

I~
83
s, 82

Player A x, A, I 2 /
/
2
3
/
/
3
2
/
/
-1
6
A2 / -4
(1 - -x,)
{nme an ds olve.
thod to re £c e the ex pe ct ed pay-ofk
Us ing grnphicnl me so lu tio n. A 's
ha s no pu re str ate gy
ga me
Solution : _The s .1re
rre sp on din g to B's pu re strategie
co A's expected pa
y-off
YJ Y4) B's pure strategy
(y, Y2
2x, + 4(1 - x, )
= - 2x , + 4
0 0 0
2x , + 3(1 - x, )
= - x, + 3
0 0 2
0
= x, + 2
0 3 3x, + 2(1 - x,)
0
X ) _
4 - 1X1 + 6(1 _
0 0 0 1 - - 7x1 + 6
.
The 4 expected pa y- of f lm es ar e pl ot ted on gr ap h :

Expected
payoff
,3 ~
2

Fig. 6.2.1

C a m e ra
S a m s u n g Quad , ,
'
,; ? ho
V./4 t Wi_th..my Galaxy ASl
I . ,,,, 1,r..
__, t
• ,; ,
✓-> -- - - ~ - - ·
~
;;,\'1· ~ ; £ _· w--,,, ' ' ' '-
 · \ ~/.,.;;-,. ~"· · · · 6.5
Industrial Man~gement Gam e Theor:y
- r;, •·

envelope (shaded portion) of four lines repre sents the

• The Iowe r mini mum
d pay-off for A regardless of what B does. The maxi mum f h l
expec te o t e ower
lo e corresponds to maximum solution poin t x =
0.5.
h' · t ·
cnve p 1 T 1s pom 1s
. t'on f l A l
intersec 1 of B3 and B4 . There ore p ayer . op ma so lutJon
ti . . m1xm
. . g of A
1s 1
with probabilities 0.5 and 0.5 respectively.
an d A 2
ame (v) is deter mine d by subs tituti ng x = 0.5 in line 3
The va Iue o f g 1 and 4.
1/2 + 2 =5/2 Line -3
v = { -7(1/2) + 6 = 5/2 Line - 4

Player B's optimal mix is deter mine d by two strate gies

defin ing lowe r grap h B3
and B~ i.e. Y1 = Y2 = 0 a nd Y4 = l - Y3•
Now B's expected pay-offs corre spon ding to A's pure strat
egies are given as
A's pure strategy B's expected pay-off

1 4 Y3 - 1
2 - 4y3 + 6

At point of intersection
4y3 - 1 = - 4y3 + 6
7
i.e. y3 = 8

and V = (4 X iJ- 1 =;

Hence solution of game state s that play er A has mix

strat egies A 1 and A with
equal probabilities (0.5) and for play er B with 2
two strat egies B and B with
7 1 3 4
probabT.
I 1hes S an d g·

6.2.2 Linear Programming Solution of Games

_) • Two perso n zero -sum gam e can also be solve d by
linea r prog ramm ing.
• Player A's optim al prob abili ties x , x , .. ... xm can
1 2 be dete rmin ed by solvi ng
maxm in prob lem. '

m~x {min ( .I a iJXi, .I ai2X i ....... .. Iain Xi

X1 t= l t= l • i= l
llJf
X1 + X2 + ......... + xm = 1
X·' -> Q' t. -- 1' 2, .... ..... m

v = max { Ia Ia
i= l
i 1xi ,
i= l
i2 xi ......... I a i xi lf
n
i= l
►
6-6
Industrial Management

f> ii xi ~ v; j = 1, 2, .. .. . .. n
i= I

• Player A's problem can be stated as

maximize z = v
subject to
m
\I - La ij Xi ~0
i = l

• Player B's optimal strategies Y1, Y2, ····:····· Yn can be determined b

problem y s01\'t

min {max( a1j y i,

Yj j= l 1=1
f J-1
_f
a2j Y j· ·· ··· · ·· .tamj Y j ]}

Y1 + Y2 + ········· + Yn =l
Yi ~ 0, j = 1, 2, .........n
• Player B's problem can be stated as
minimize w =v
subject to

v- I>
j=1
n
ij yi ~ 0

Y1 + Y2 + ········ Yn =1
Yi ~ 0, j = 1, 2, .......n
v unrestricted.
• These two problem optimize the same variable v since they are dual of e.:
other i.e. optimal solution of one problem automatically yields the optirr-
solution of the other.

"* Example ~ : Solve the following game by~ gra: ming

Player B _ ]!;;;!(y-
.81 82 B3 ~ ~")

A1 3 -1 -3 -- ~
Player A
¾
A2 -2 4
e /,h_..,rt\°'-'i'O
l.c_.Y
_,
-5 -6 2
 .
1-: ;.
6-7 Game Theo ry
lndustri~F tia~~~e ~ent .

Solution :
Row min

3 -1 -3 -3

-2 4 - 1

-5 -6 2 - 6

3 4 2
Column max

Linear program for playe r A

maxi mize z = v

Subje ct to
2x 2 - Sx3 ) ~ 0 -;< . . .(1)
v- (3x1 -
.. . (2)
v - (-x 1 + 4x 2 - 6x3 ) ~ 0 ~
/( ... (3)
V - (-3X1 - X2 + 2X3) ~
0

. x1 + X2 + X3 = 1
... . ~ ==
On solving the equations optimum solution can be found as
x 1 = 0.39 X2 = 0.31 X3 = 0.29 V = -0.91 .
Linear program for player B
minim ize z =v
Subject to
.. . (4)
V - (3yl - Y2 - 3y3) ~ 0
... (5)
V - (-2yl + 4y2 - y3) ~ 0
...(6)
v - (- Syi - 6y2 +· 2y3) ~ 0

Y1 + Y2 + Y3 = 1
The equation yields op~ uq:i solutions.
Y1 = 0.32 Y2 = 0.08 Y3 = 0.6 v =- 0.91

Points to Rem emb er

igent opponents with
1. Game theor y is a decision theor y in whic h two intell
conflicting objectives are tryin g to do bette r than other.
game .
2. A game with two playe r is called two perso n, zero-sum
3. Maxi min value is expr essed as V and
 \n d u s tr
ia \ M a n
ageme
nt
---
m\n\m
, When ax v,,\ue \s e x p
. , ,ax\n , \ re
n v a l u e s s e d ~s V . Gall\
~
~
s. Th e p,,y mmun>
' value _
-ofl o ! s \he opt
addle p u
b- Mis o \ n t is c a na\ stra
ed stra
teg \ e s g lled v a l tegy \ s sadd\
ame can ue o! g
b e s olv ame.
\ . Graph e d b
i c a \ s o\ y two me • \>I>\"
ution t h o ds
2. U n e a
r p ro gr,,
n'1l'ling
Review
Questi
ons
I . Defi n
e the fo ll
otuing
n) G,wtc
throry
d Pay-o b) Strate
ff gy
d Saddle d) two-p
point ..__ erson , ze
2. How ,, ro-sttm
t'.tc opti m f)· value
al so lut io of game .
3. ~xpln n of two
4. :,ok,c
rn how th
thr gamr
e optima
l solutio
-person,
n is foun
zero-sum
game is
found ?
. \
problem d in mixed s
by graph trategies
ical meth ?
81 od . \
i)
\

\
4 \ 3
\ i i)
4 \ 8
\
- Solve th •
5 efollowin lAns. :
g Optima
B pay-off matrix
. for o \ strateg
y for pl
ptimalihJ a y e r A.
usin<1 <1 l '
• • rapl11· l v a \ u

~ ~•
ca melhe o f g a m
1
3
- od. e t o p\a:y
e1r t,,<.> I-.
-,
A
3 -
L__
1 1.2. E
5 -
'- - - -1
6 - l
-6
\Ans. : O
-
ptimal m
·ix s t u
t eg y f
orp\aye
r
1 2~ = ( ~
i s ly , y
\:2.'
1 ~) a
n d valu
2
I e o{ 41,am
e\l ='ll

aoo

e=*
~
s