_ GAME THEORY (0 INTRODUCTION eee In many situations two or more parties with conflicting interests, when the outcome of the adion of one depends upon the action which the other takes, are required to take decisions, such situation are termed as competitive situations. For example, situations arising in the course of military operations, candidates for an election, advertising and marketing compaigns by competing business firms, etc., have conflicting interests. Game theory helps in determining the best course of action for an individual in view of the expected counter moves from the competitors. Game theory was developed by John Von Neumann and Oskar Morgenster in their famous work entitled “The theory of Games and Economic Behaviour” in 1944. The theory determines the situations of rational behaviour in competitive situations. O TermINoLocy AND CONCEPTS Important terms and concepts commonly used in game theory are: 1. Game: A game is competitive situation in which two or more participants (called players) confront one another in pursuit of certain conflicting objectives. Some players may win and some players may lose. In other words, a competitive situation is called a game if it has the following features: () There should be finite number of players (i) There should be finite number of strategies (i.e., possible course of action) available to each player and ii) Each player should known the rules governing the choice of action. 2. 2-Person game and n-person game: There may be two or more than two persons playing a game. If the number of players is two, it is called a 2-persons game. Similarly if the number of players are n (where n > 2), We refer the game as n-persons. 3. Zero sum game and non-zero sum game: A game in which the gain of one player is equal ‘o loss of the other player, is called a zero sum game. Here the sum of gains or losses of both (all) players is zero. As opposed to this, ifthe sum of gains or losses is not equal to 7er0, we call it as non-zero sum game. ¢ in which there are only two persons or players 1 to the loss incurred by others, ie., net gains 4. Two persons zero-sum game: A gam and the gains made by one person is equal Seanned wiek CamScannerOPeratons Researen 308 js called two persons zero sum game. For example, there Pepsi are struggling for a larger share in the marke, d by the Coca-cola company must be the lost share of of the two players is zero, ‘two companies Coca-cola and any share of the market gained by and therefore, the sum of the gains an Coca-cola is 60% so that the lost share o| is zero, ie. (+60%) + (-60%) = 0. : / 5. Pay-off: The outcomes of a game due to adopting the as a of action by the competing players in the form of gains or losses for each of the players is known ag pay-off. 6. Pay-off Matrix: In a two person, zero-sum game, the resulting gain can be exily represented in the form of a matrix, called the pay off matrix or gain matrix. Thus, pay-off matrix is a table which shows payments to be made at the end of a play of game. Let us consider a game with only two players A and B in which player A has 3 courses of action and player B has also 3 courses of action. The pay off matrix can be constructed by the following steps: are Now © OF Pepsi losses equals zero. In other words, if gaint 1 Pepsi will be 60%. The sum of gains and lowes (Row designations for each matrix are the courses of action available to A. (i) Column designations for each matrix are the courses of action available to B. (iii) The cell entries are the payments to A for one matrix and to B for the other matrix. The cell entries ayy is the payment to A in A's pay off matrix when A chooses the course of action 2 and B chooses the course of action 3. (2) With a two person zero-sum game, the cell entries in B's pay-off matrix will be the negative of the corresponding all entries in A's pay off matrix and the two pay off matrices will appear as follows: A's pay off matrix B's pay off matrix Thus, the sum of pay off matrices of both A and B is a zero matrix. Note: in luo persons zerosim game we shall not write the B's pay off matrix since in B's pay-off mar {he cll entries are just the negative ofthe corresponding cell entries in A's pay-off matrix. 7. Strategy: The strategy of a player i er deci : player is the pre. i : ae his course of action from his own list of ounces ne Tule by which a player dec courses of action during the game. There are following four types of strategies: _ () Pure strategy: It is the Seanned wek CamScannerame TEOTY 309 (ii) Mixed Strategy: In mixed necirdishédhnith dliisearive fea the player decides his course of action in with each course of action Stree distribution. Probabilities are associated erie ae the selection is done as per these proabilities. In 5 ‘annot eC e i i. ay accra be sure of the course of action to be taken of (iii) Dominated Strategy: Sometimes i a sin a gam of pure strategies of Bane We come acro a fact that one or more a player are infer Teeter ant: ea 'yer are inferior to at least one of the remaining strategies. is inferior strategy is never used. ‘This dominated by a superior pure strategy. i : Fi (iv) Optimal Strategy: A course of action or plan, which puts the player in the most fer irrespeeav preferred position, irrespective of the strategy of his competitiors is called an optimal strategy. Any deviation from this strategy results in a decreased pay-off for the player. inferior pure strategy is 8. Decision of a Gam In game theory, the best strategy for each player is determined on the basis of some rule or criteria. Since both the players are expected to be rational in their apporach, this is known as criteria of optimality. Each player lists the possible outcomes from his action and then selects the best action to achieve as per his objectives. This criteria of optimality is expressed as Maximin for the maximising player and Minimax for the minimising player. 9. Maximin-Minimax Principle: This principle states that if a player lists his worst possible outcomes of all his potential strategies, then he will choose that strategy which corresponds to the best of these worst outcomes. Thus, by the Maximin- Minimax criterion of optimality maximising player A will choose that strategy which corresponds to the best of these worst outcomes and minimising player B will choose that strategy which corresponds to the best (minimium) of the worst outcomes (maximum loses). ‘Thus, this principle consists of two parts: () Maximin Criteria: ‘The maximising player lists his minimum gains from each strategy and selects the strategy which gives the maximum out of these minimum gains. (ii) Minimax Criteria: The and select the strategy which gi der a two person zero sum é 4 minimising player B with the following pay-off: minimising player lists his maximum loss from each strategy ives him minimum loss out of these maximum losses. i game involving three strategies for For example, consi maximising player A am Player-B 1 " MW Row Minima, 2 2 3 Player A i é Bo 7 5 —Maximnin a7 Mt 7 4 7 Column 15 OS Minimaxt Maxima Seanned wek CamScannerOperations Research 310 ini 1. The player A will use II strategy ang imin and Minimax are equal d re oe wil ao Rarer “The strategies followed by both the players are calleq layer B wi z ‘optimal strategies’. / ; “anced a é the maximum guaranteed gain to the . f the Game: The value of the game is : 0 cing player itboth the players use their best strategy. It is the expected pay-off of play when all he players of the game follow their optimal strategies. The game is called fir if the value ofthe game is zero and unfair ifit is not zero. 11. Saddle point: The saddle point in a pay off matrix is one whi A the smallest value i” its row and the largest value in its column. The saddle point is also aoa equilibrium point in the theory of games, An element of a matrix that is simultaneously minimum of the row in which it occurs and the maximum of the column in which it occurs is a saddle point of the matrix game. In a game having a saddle point optimum strategy for a player Aisalways to play the row containing saddle point and for a player B to play the column that contains saddle point. In case there are more than one saddle point there exist as many optimum points or solutions of the game. There may or may not be the saddle point in the game, When there is no saddle point, we have to use algebric methods for working out the solutions concerning the game problem. Saddle point can be found out in different ways. OC Trees or Game ProBlems There are two types of game problems: 1. Pure Strategy Game 2. Mixed Strategy Game When each player chooses his most preferred position by adopting a pure strategy, it is called a pure strategy game; while if they have a mixture of different strategies to achieve the most preferred position, itis called a mixed strategy game. 1. Pure Strategy Game or Game with Saddle Point a Ea In case of pure strategy game, the maximising player arrives at his optimal strategy the basis of maximin criterion while the minimising player's strategy is based on the minit criterion. If the maximin value is equal to the minimax value, then the game is said to ha saddle point or equiblirium and the best strategy for both players will be these which correspol as the value of the game. This, in order to sol one has to find the saddle point. Method to find saddle point Saddle point can be found in two different ways Method I: Saddle point is found as follows: (Creating column for minimum value of each row (@) Creating row for maximum value of each column Seanned wek CamScanneré joa TEOKY 311 ‘the value of the pay off matrix where Mini eM i jalue in the Column Maxima gives the salle pol oa Bn Row Minima and Minima : nt. Method H: The saddle point ean also be found as follo Ws: y the minim (@ Select the minimum value of each row of the pay off matrix and put a circle O d trix a 3 aroun (ii) it. fa) Select the maximum value ofeach column of the pay off matrix and put square Claround ear’ a i 4s If there appears a value in the pay off matrix marked with both circle and square [O} that value is a saddle point of the pay off matrix, (it) may be m There may be more than one saddle point in a game. In such a case, there exist many optimum solutions of the game. (ii) The value of the game may be positive [+ve] or negative [-ve. (ii) The value of the game may be zer0 which means that the game is fair. (iv) Saddle point may or may not exist in a given game. “The following examples illustrate the solution of the game with pure strategy (or game with Note: (i) saddle point): Example 1. Solve the game whose pay off matrix is given below: Player B B, BBs Aypfeot 2 seo PlayerA A,| 0 4 1 a] 2 3 3 ether there is a saddle point or not. To determin minima and column maxima e the Solution. First of all, we will see wh saddle point, we obtain the row B, B, Row Minima re 2 4° Maximin cs of ma A, 7 7 Column Maxima " e 2 Minimax «a saddle point at the position (1, 1). Hence the Minimax, the game ha Since Maximin Solution of the game is: (The optimal strategy for player & (i) The optimal strategy for player B (ii) The value of the game (v) = ! =A, =B Seanned wek CamScanner312 Operations Resany Aliter: The above game can also be solved by using IInd Method 8, _B, 8, Saddle point is a point where a circle and a square [O] are both combined. The solution of the game is: () The optimal strategy for player A = A, (ii) The optimal strategy for player B = B, (iii) The value of the game (v) = 1 Example 2. Find the saddle point and solve the game Player B By eee Byoy Ay | 1S O43 . PlayerA A] 6 7 A| 7 4 0 Solution. To find the saddle point, we obtain the row minima and column maxima. B, B, B, Row Minima A, 15 2 3 2 Ay 6 & 7 8 Maximin A, a 4 0 7 Column 15 5 7 iMaama Minimax Since Maximin = Minimax, the saddle point occurs at position (2, 2). Hence the solutio of the game is: () The optimal strategy for player A = Ay (ii) The optimal strategy for player B = B, The value of the game (v) = 5 Example 3. For the following pay off matrix of firm A, determine the optimal strategies for both the fi and the value of the game: Seanned wiek CamScannerie 313 A, xX A A, FirmA solution. First of all, we will see whether there is saddle point or not. To obtain the saddle point, we determine the row minima and column maxima 8, 8, By 8, B, Row Minima A 3 1 4 6 7 “1 A 1 8 2 4 12 -1 A 16 8 @ 14 12 6* Maximin A 1 in 4 2 1 4 Column 16 "1 e 14 12 Maxima Minimax Since Maximin=Minimax, the above game has a saddle point at position (3, 8) and hence the solution of the game is: () The optimal strategy for player A = Ay (i) The optimal strategy for player B= Bs | (ii) The value of the game (v) = 6 Example 4. Solve the following game matrix: F B her there is saddle point or not. To obtain the saddle First of all, we will see wheth m and column maxima point, we determine the row minima B 1 i IV Row Minima A 2 -2 3 4 2 " 4 2 2 4* Maximin Column 4 3 4 Maxima Seanned wek CamScanneraa Operation Resa Since Maximin = Minimax, so the above game has a saddle point atthe position (2,9) ang hence the solution of the game is: (i) The optimal pure strategy for player A = II (i) The optimal pure strategy for player B = IT (iii) The value of the game (v) = 1 ‘Two Saddle Points Example 5. The pay off matrix of a two person zero sum game is: Player B 5, 8 8 a,[ 1 204 PlayerA A,] 0 4-4 Ay 1 3 -2 Solution, First of all, we will see whether there is a saddle point or not. To obtain the saddle point, we determine row minima and column maxima. B, B, Row Minima A, 2 4° Maximin A 4 4 Ay 3 -2 Column t 3 * Maxima 1 1 Minimax Minimax Since Minimax = Maximin, so we have two saddle points at the position (1, 1) and (1, 3) hence the solution of the game is: (@ The optimal strategy for player A = A, (i) ‘The optimal strategy for player B = B, or By (ii) The value of the game (v) = 1 Example 6. Solve the following game B Solution. First of all, we will determine whether there is saddle point or not. To determi the saddle point, we determine row minima and column maxima Seanned wiek CamScannergame Theory 315 8 A ' ! H 1 Row Minima 5 : wo 6* Maximin 0 4 2 3 A Column e ~ Maxima t - ; Minimax Minimax 0 we have two saddle points at the position (1, 1) and (1, 3). Thus, the solution of the game (i) The optimal strategy for player A = [ (i) The optimal strategy for Player B = I or III (iii) The value of the game (v) = 6 Strictty DeTERMINABLE GAME AND Fair GAME. A game in said to be strictly determinable if Maximin = Minimax = Value of the game (v) anda game will be fair if Maximin = Minimax = value of the game (v) = 0. Example 7. Is the following game strictly determinable? Is it fair? B by by by a, 4 0 = Ae |e 4 4 a; 8 5 3 Solution: B Row Minima 0 Maxima A a a Column . Maxima Minimax ‘¢ Minimax = =Value of the game = 0. me is strictly determinable as Since Mi f the gi , the gan Maximin Well as fair game. Seanned wek CamScanner— 3 a Operations Research Example 8. Consider the following game with the following pay off? (a) Show that the game is strictly determinable, whatever 1. may be. (b) Determine the value of game. Ignoring the value of 2 the given pay off matrix represents: B Row Minima a, 4° Maximin hao 2 Column Maxima — Minimax Since Maximin = Minimax = Value of the game = 4, the game is strictly determinable, whatever the value of 2 may be. t ji) Value of the game = 4 Awill opt for strategy = a,; B will opt for strategy = b, Example 9: Determine the range of value for $ and T that will make the pay off element (2, 2) a saddle point for the game? Player B, 4 6 7 PlayerA oT Tp L&] Ss | 10 Solution: — Ignoring the value of § and TT. We try to find the saddle point. Player B Row Minima [4 6 7 44 PlayerA | 12 a T | 9* Maximin 6 [Ls [00 Jemin Column 12-10 Maxima Minimax ‘There exists a saddle point at (2, 2) element of pay off matrix. This implies a condition on Sas S <9 and on Tas T > 9. Seanned wiek CamScannerane TEOTY 317 1, The pay off matrix ofa game is given below. Fi value of the game for A and B, ams Sel the best strategy for each player and the | 8, BB BB, By | A,| 15 2 3 A,[ 0 20 -60 | @ Al 6 5 7 (i) A} 30 10 -20 ras ae Tee ome) A,| 70 -80 -30 3. Solve the game whose pay off matrix is given by: Player B Player B 1 oun ow 1 fo 5-4 Seg 8 if 2 15 -2 () PlayerA | 6 2 0 -5 (i) PlayerA I] -§ -6 4 m| 7 12 8 7 um] -§ 20 -8 wl 2 8 6 5 4. For the following pay-off m: firms and the value of the game (using Maxim Roeae RAO a Firm B eous Vv erneo< Seanned wek CamScanner atrix for firm A, determine the optimal strategies for both the in-Minimax principle)318 5. Solve the following two persons zero some games: B a BB 9 8 6. Solve the following two persons zero some game: 1 7 8. 4 @ 5 6 4 5 7 20 3 7. Acompany management and the labour union are negotiating a new 3 years settlement, Each of these has 4 strategies: I. Hard and aggressive bargaining I. Reasoning and logical approach III. Legalistic strategy IV. Conciliatory approach ‘The cost to the company are given for every pair strategies choice, Company Strategies I ul MW 15 12 Union Strategies What strategy will the two sides adopt? Also determine the value of the game. 8. Is the following game strictly determinable? Is it fair? by ie lS fs is Seanned wiek CamScannerory came THe* 319 i iven the pay- ix i g, Youare given the pay-off matrix in respect of a two-person, zero-sum game, as follow: Bs Strategy A : a As Strategy A, | 3 A 7 A, (a) Write the maximin and minimax strategies. (b) Is ita strictly determinable game? (©) What is the value of the game? (d) Is this game a fair one? 10. Consider the game with the following payoff table: Player B PlayerA| B, _B, A, oa A 24 | (a) Show that the game is strictly determinable, whatever 2 may be. (b) Determine the value of the game. ANSWERS |. ¥ = 4, optimal strategies: A = Ag, B = Bs . (i) v = 5, optimal strategies: A = Ag, B = By Gy ~20, optimal strategies: A = As, B = By 3. @)v = 7, optimal strategies: A = As, B = By (i) v = 2, Optimal strategies: A = Ay, B= By 4 , optimal strategies: A = III, B = IT 5 2 Optimal strategies: A = As, B = By 8. v= 4, optimal strategies A = Ag, B = Bs 7. v= 19, optimal strategies: U = U, ie», hard and aggressive bargaining, C = Cy, ie., legalistic strategy. 8. Yes as saddle point exists. v = 8, Not fair since v = 8 9. (a) Maximin = A,, Minimax = By (b) Yes, (v= 0 (a) Yes 10, | v= Seanned wek CamScanner320 Op. (2) Mixed Strategies Games (Games without Saddle Point) eed Strategies Games (Games without Saddle Point) —=a erations Resear All game problems, where saddle point does not exist are called mixed strategies problems In other words, in the mixed strategy problems, maximum of row minima will not be equal tg minimum of column maxima. Both players will use different strategies with certain Probabilities to optimise. For the solution of games with mixed strategi (1) Odds Method (2x2 game) (2) Dominance Method (2x3, 3x2, 4X4, ete. game) (3) Graphical Method (2xn or mx2 game) (4) Sub Game Method (2xn or mx2 game) (5) Equal Gains Method (2x2 game) Let us discuss them: , the following methods are used: (1) Odds Method: This method is used only in case of a game with 2 x 2 matrix without saddle point. It consists of the following steps: Step I: Find the difference of two numbers in column I and put it under column II, neglecting signs if occurs. Step Il: Find the difference of two numbers in column II and put it under column I, neglecting signs if occurs. Step III: Find the difference of two numbers in row I and put it under row II, neglecting signs if occurs. Step IV: Find the difference of two numbers in row II and put it under row I, neglecting signs if occurs. The value thus obtained are called odds. Step V: Make the odds numbers into fractions over the sum of the pai ‘These values represents the probabilities with which the players m their optimal strategies. Step VI: Then we determine the value of the game. Mathematically, Consider a 2 x 2 game without a saddle point. Strategy + J B, B, Odds a A a 2, | ib, - 6) A by by | olay Odds t t Ja,— bal la, - byl irs of numbers. just use them in, The optimal strategies for each player and the value of the game are determined by using, the following formulae: 2-6, p, = Probability for selecting strategy A, 1h te] 14-6, |+]a,- Seanned wiek CamScannerr game THEOTY 321 La = a1 14-2 l+la- a! | a = be | 1a, - 0, 1+], —- | py = Probability for selecting strategy Ay = qu = Probability for selecting strategy B, = Value of game (v) = Example 10. Solve the game: Aa) ds 10 AL +4 3 Solution, _ First of all, we will see whether there is a saddle point or not. | B, B, Row Minima A 0* —Maximin A 4 Column Maxima = Minimax. Since Maximin # Minimax, the game does not have a saddle point. Both the players will use mixed strategies. Now, we use odds method to solve the game: 8, B, Odds-—_—Probabilty A, 1 0 7 78 oy A 4 3 1 18 op Odds 3 5 Probability 3/8 5/8 WN % Value of Game (o) = 12+, 3 Seanned wiek CamScanner322 Operations Researey_ Note:in a 2 x 2 gam, ifthe largest and the second largest elements tie along a diagonal, then the gay hhas no saddle point. We sotve such game problems with the help af odds method. aM § 1 A, 3 4 4 Solution. Since the given game has no saddle point, therefore both the players will use mixed strategies. Example 11. Solve the following game. B EO) ® 4 Now we use odds method to solve 2 x 2 game. Odds Probability A 4 115 Py Ay 4 4s Pr A Odds 3 2 Probability 3/5215 q D Bx1+3x4_5+12 7 f pone eu Value of Game (v) v7 ar} Optimal Strategies with probabilities Player A> 1 = a = ine oe Player BI Matching Coins Game Problems Example 12. Tivo players A and B match coins. If the coin match, then A wins two points, if the coins not match then B wins two points. Determine the pay off matrix, optimal strategies for players and the value of the game: Solution. The following matrix is prepared from the given problem: Player B HoT a ®@ @ 2 PlayerA Seanned wiek CamScannerov sno 0 323 since the above game does not have sad auategies. We now use odds method to solve 2 eeegens AYER will we mined ve 2 X 2 game: H a Odds Probability Z : esate 4 418 = 112 Odds Pa Probability 4/8=1/2 4/8 =1/2 % % 2x4- s VanetPGatie: hay 444 ies a 1 s 2 Note: Though odds method is easier to apply,it cannot be used to larger games (3 x 3, 3 X 2, 2 x 3, etc.). is used only for solving 2 x 2 game. EXERCISE 2 1. Solve the following game and determine the value of the game: optimal Strategies with probabil 1 Player A 1= 5, 1= PlayerB—t=1, y= 2 2. For games with the following pay off matrix for A is: B ‘ : ' 1 5 i oils | eit: :| | 7a 5 Determine the solution of the games and the optimal s 3. Solve the following game by odds method: ® di) ii) _ B 2 5 iste pent-up 2] > oO 7 6 4. Solve the following game and determine the value of the game: 0 (i) (ii) B fic] trategies for each player. B Seanned wek CamScanner324. Operations Roses, h rd layers. Suppose A wins one unit of value when are two tails and loses 1/2 units of value when pay off matrix and value of game. there Ina game of matching coins with 2 pl there are 2 heads, wins nothing when there are one head and one tail. Determine ‘Two players A and B match coins. If the ¢ coins do not match, then B wins one unit the players and the value of the game. Consider a modified form of matching coins game problem. The matching player is paid 10.00 if the coins turn both we heads and %6 if the coins turn both tails. The non. matching player is paid €4 when the two coins do not match. Given the choice of being ‘The matching or non matching player, which one would you choose and what would be your strategy? 8. Ina game of “matching coins” with two players, suppose A wins 4 units of value when there are two heads, wins 2 units of value when there are two tails and loses 1/4 unit of value, when there are one head and one tail. Determine the pay-off matrix, the best strategies for each player and the value of the game to A. ANSWERS = coins match, then A wins one unit of value, ; ‘ ifth of value. Determine the optimum strategies ies for - x 1 v=3,Ast= n=} por-2,n-4 2 2 3 3 13 12 2 8 6 1 2 Ov= =], asic 2 na 4 poise) nes wee _ Ove s l= jg Bots gell= jg @o=8Ast= 5 Boi=in=1 2 : 3 7 : 3. @v=-2 aandBoi= te 3 Gy acte4t ye 3 poe? 4 4 7 7° I= 7.0 7Bol 7 : 1 N= 7 @)v=0As1=+, 1-23 51-3 qo? a 3 3 puss x. ol 1 1 4. @v= Asia} nel pope l yl ys fl 1 é ts og Ue = —1l=- = 2 2 2 g Gv =3andAI gles 2 1 Bol= 2,1 = 5 ii) Ned 1 r 5 =-BoI=-,1=- 3 3 2 g Bois Sues 1 5. v=2,A> 7 Seanned wek CamScannerome ™eOrY 325 minance Method: Someti ao not exist the saddle Sinn the game is of the order 3 x 3,3 x 4,4 x $ etc.and shere J0r* inance and thi » then some rows/column: Fas at ear is of dominance fe game can be transformed in s can be deleted by applying the voy using odds method. to the game of 2 x 2 order and then find the sol Rules gominance @ 9x2 Rule I(Row wise). When all the elements in a row are less tha . in another row then that row is dominated and can be eae a (Principles) of Dominance: In. general aeeee ercliminnte onsen esieaees the following rules (or principles) of and reduce the size of the pay off matrix to cements Rule 1(Column wise). When all the elements in i : s in a column are greater than o1 are greater than or equal to th cenresponding elements in another column then that column is llominated and'can be deleted. i 1 Role Ht (Modified Rule). When all the elements in a row are less than or equal to the anerage of two oF more rows, then this row is dominated and can be deleted. Similarly when all the elements ofa column are greater than or equal to the average of two or more columns, then thiscolumn is dominated and can be deleted. ° Note: Rules of dominance can be used to both pure strategy and mixed strategy problems. 10 Appucations oF Dominance MetHo aloha ana ‘The practical applications of dominance method are studied under two heads: (1) Applications of Rows/Columns Dominance Rules (2) Applications of Modified Dominance Rules Abrief description of each is given below. ons of Rows/Columns Dominance Rules: When the game matrix is of order can be reduced to 2 x 2 matrix size by applying he solution of the game using saddle point (1) Applicati 3x3,3x4,4 x4, 5 x 6, etc., then the game ronscolumn dominance rules and then finding t! method or odds methods. The following examples illustrate | offmatrix to 2 x 2 and then find the sol | Example 13, Solve the following game: the dominance method for reducing the size of the pay ution of the game by Odds Method: Player B | ft ld | (outa 2 PlyerA | 6 2 7 |e 2S is a saddle point or not. To obtain the termine whether there 0 and column maxima. First of all, we will de ' ow minima saddle point, we determine the ¥ Seanned wek CamScanner326 Operations Researey Player B 1 Row Minima 1 1 7 2 1 PlayerA 6 2 7 2" Maximin W 5 15 1 Column 6 7 7 Maxima Minimax Since Maximin # Minimax, the game does not have a saddle point.The players will use mixed strategies. Now we use dominance method to reduce the size of the game to 2 x 2. Step I: Since all the values of Row III are less than the corresponding values of Row II, Row III is dominated and hence we delete Row IIL. We get W ' 1 7 2 1 6 2 7 Step I: Since all the values of column ITI are greater than or equal to the corresponding values of column I, column III is dominated and hence we delete column IIL. ‘Thus, we get the following reduced 2 x 2 matrix. U @® " oH © Now this 2 x 2 game has no saddle point and can not be reduced further. Therefore the optimal strategies of the players will be mixed strategies. We now use odd method to solve 2 x 2 game: ! I Odds Probability 4 \ 1 7 4 as 10 Py 6 0 6 2 6 Ss oO Odds 3 5 Probability = 5. ae 10 10 q 4% 1x4+6x6_ 40 Value of the game (v) = ——~2** = 40 _ game = G56 10 74 a —_ | Seanned wek CamScanner| wr 327 _a strategies with probabilities oie do 4 6 payer? pO 5 5 4 Payer B> 79 ig ample 14, Solve the following two persons zero sum game: Player B By B, By A} 5 ii PlaerA A,| 2 -1 8 A,[ 18-6 10 olution. First ofall, we will determine whether there is a saddle point or not. By B B, — RowMinima A 5 7 11 | 5*—Maximin xX 2 “1 af Ay 18 6 10 | -6 Column 18 7 n Maxima t Minimax Since Maximin # Minimax, the game does not have a saddle point. The players will use nixed strategies. Now we use dominance method to reduce the size of the game to a 2 x 2. Step I: Since all the values of Row II are less than or equal to the corresponding values of the Row I, Row II is dominated and hence we delete Row TI. We get, I I il 1 5 - 1 u 18 +6 10 din Ik Si Hare greater than or equal to the corresponding see ae ‘and hence we delete column 111. values of column II, column HI is dominated Thus we get the following reduced 2 x 2 matri ! i i) mM @ ddle point and cannot be reduced further. Therefore, the I be shixed strategies. Now, we use odd methods to solve 1 N Optig oY this 2 x 2 game has no sa i 2 a uy 2eenetis for the players will Seanned wek CamScanner328 erations Researy ' ll Odds Probability 4 BB 1 5 7 713° PA | t) fee | m 18 6 273 Pe Odds 13 13 13 13 Probal a oe ou 2 5x24+18x2_ 120436 _ 156 2442 26 26 Value of the Game (v) = Optimal Strategies with probabilities I IL ul 12 1 Pl: A: = 0 = ayer 73 13 eas PlyerBi> 5 50 Example 15, Given the pay off matrix for A, obtain the optimal strategies for both the players and determine the values of the game: Player B Solution, First of all, we will determine whether the game has a saddle point or not It " {Row Minima ' 6 7 | -3* Maximin " 0 4 | -3* Maximin Column 6 oO 7 Maxima Minimax Seanned wiek CamScanneryn 329 jqce Minimax # Maximin, the above game does not have a saddle point .d strategy: we use dominance method to reduce the game m: ‘The players will sxe Now since all values of column IIL are greater than or equal of the corresponding values of {column 111 is dominated and hence we delete column III. We get atx 10.2 X 2 size, lv @ v ‘This 2 X 2 game has no saddle point and hence we use odds method to solve it. Odds Probability Probability 3 2 12 4 i) =f a 6(3) + (-8(9) 18-27 __3 4 Value of Game) = 349 12 Optimal strategies with probabilities 1 ou Ww 3 = 0 PayrA> = GG | 1 3 Player B > a4 9 Seanned wek CamScanneray 330 Operations Researey Example 16, Solve the following two persons zero-sum game given the following pay off matrixe Player B tooo 1} 4 5 8 Player A — mys 4 0 Ww] 6 +4 2 Solution. _First of all, we will determine whether the game has a saddle point or not, Player B tomo ese ip mi} 6-4 ~ a OYE Oe Since the game does not have a saddle point, the players will use mixed strategies. Now, we reduce the game to 2 x 2 size by applying the principle of dominance. Step I: Since all values of column II] are = corresponding values of column II, column IIL is dominated and hence we delete column III. The reduced matrix is: B eel t[4 65 in li ee o te) 6. 4 vVLe_ +6 Step II: Since all values of Row II and Row III are < corresponding values of Row I, hence Row II and IIT are dominated and hence we delete Row II and Ill. The reduced matrix is eee ee Seanned wiek CamScanner331 ony net oft ‘hi ix game has no i jog x 2maurix Be saddle point and therefore we use odds method to solve it: ! Nl Odds Probability ' 12 12 13, uv 1 a 3 i odds 11 2 3 Probability 14 2, 13 B % 4x12+6x1 Value of Game (”) = 454) Optimal Strategies with probabilities I I UI Iv 12 1 PhyerA> 75 0 0 is 2 A oi PhyerB-> = BB Kxmplel7. Tivo firms are competing for business. Whatever firm A gains, B firm loses. The table given below shows advertising strategies of both the firms and utilities to firm A for various market shares in percentages (assuming this to be a zero sum game): Firm B Press Radio TV. Press Radio TV. Find optimal strategies for both firms and expected percentage of market shares to firm A. First of all, we will determine whether the game has a saddle point or not. Firm B I i) Firm A i Row Minima 40 — 60° Maximin = 60" Maximin Firm A, ml Col 75 75 70"t Monae Minimax Seanned wek CamScannerOperations Resea 332 ch Since Maximin # Minimax, the above game does not have a saddle point. Both the players will use mixed strategies. é i ance) to reduce the game to a2 x 2 size, Now we use dominance method (or rules of domin an or equal to the corresponding values of Step I: Since all the values of Row I are less th , Row II, Row I is dominated and hence we delete Row I. We get Press — Radio TV. Radio 75 75 60 TV. 60 70 70 Step II: Since all the values of column II are greater than or equal to corresponding values of column I, column II is dominated and hence we delete column II. The resultant reduced matrix is: Press TV. Radio | 75 60 TW. 60 70 Now this 2 x 2 game has no saddle point and cannot be reduced further. Now we solve it by using odds method. eo Press TV. Odds Probability Radio | py co | to 10.2 4 25 5 ' Ty. 60 m | 1 18.3 25 Odds 10 15 Probabity 12 15 25 25 Geer: 2 5 % % Value of Game (v) = 250) + 60x (15) _ 7504900 _ 1650 10+15 95 > og Seanned wiek CamScannerpre™eory 333 mal strategies with probabilities: ce Press Radio TV. 2 3 AmA> 9 5 5 2 3 FimB> 5 : 3 ample 18. Solve the game whose payoff matris is given as: Solution. aa the above game does not have a saddle point, the players will use mixed strategies. Now we use dominance method to reduce the game to 2 X 2 size. Step I: Since all the elements in Row I are less than corresponding each element in Row II, Row 1 is dominated and hence we delete Row I. We get, I i uw Vv W mW Vv Step I: Since all the values in column III are greater than or equal to the corresponding values of column I, column II] is dominated and hence we delete column III. We get 1 " Vv 6 1 2 my) 3 2 a 07 |L 2 3 Seanned wek CamScanner’ 334 Operations Researey Step IIT: Since, all the values of Row IV are less than or equal to the corresponding values of Row II. Row IV is dominated and hence we delete Row IV. We get, I W Vv Step IV% Since all the elements of column IV are greater than or equal to corresponding values of column II, column IV is dominated and hence we delete column IV. We get, ' u "Ta © a @ a The above 2 x 2 game has no saddle point and cannot be further reduced. Now we use odd method to solve the game. I Ml Odds Probability my] -3 2 5 Odds 1 9 1 9 Probabil ae ney, 10 10 6x5- 3x5 _ 30 545 1010 Values of Game (x) = Optimum Strategies with probabilities: I Wl m Iv PlayerA> 0, a 1 ry , - : 0 1 9 PlayerB> 1, 9, oe 10 10 %. 9 Seanned wiek CamScanner“solve the following gam Player B tomo if 3 5 4 Goes Oil a3 vo mM -1 = 2 2, Solve the following game: 4 6 3 @|3 3 4 2-3 4 3. Solve the following game: B @ bof ll if 17 A W 6 2 in| ae st 2 4. Solve the following two persons zero sum Player A 5. Solve the following game bi Player A 1 15 10 @) @ game: RON Player B yy Dominance Principle. Player B " 35 20 50 55 W 25 5 10 5 2 1 2 B Dose Wve all quan 8 Tsio8! het 6 1 12 Seanned wiek CamScanner 3350 7 erations Rosearh ine the value of the game: 6. Solve the following games and determine the value & : B ® ii sa ' 5 4 : ie oo 8 A h [ . 5 A i] 5 2 4 ‘al ; a 5 uy 2 +3 wL6 5 6 7. Following is the pay off matrix for player A B 8, BB, BB, Al 4 4 2 AA 6 8 alto 24 Use dominance properties, obtain the optimum strategies for both the players and determine the values of the game. (Hint: R, < R,, C, > C, > C,,C, > C] 8, Aand B playa game in which there are three coins, a 5p, a 10p, and a 20p. Each selects 2 coin without the knowledge of the other choice. If the sum of the coins is an odd amount A wins B's coins. Ifthe sum is even B wins A’s coins. Find the best strategy for each player and the value of the game. 9. Aand B playa game in which each has three coins: a penny, a nickel anda dime. The penny is worth @ one, nickel € two and dime & three. Each selects a coin without the knowledge ofthe other's choice. Ifthe sum of the coins is an odd amount, A wins B's coin; If the sum is even, B win's A's coin. Find the best strategy for each player and the value of the game. (Hint: Pay-off matrix for player'A' AB Penny (1) Nickel (2) Dime (3) Penny (1) Nickel (2) Dime (3) 10. Two competitors are competing con for the market share of th matrix in terms of their advertisi { ¢ similar product. The pay off ing plan is shown below: Competitor B Competitor A No Medium Large Advertising Advertising Advertising No Advertising Medium Advertising Large Advertising 16 Suggest optimal strategies for the wo raw and the net value thereof. Seanned wek CamScannerneon oo? 337 wo companies A and B are competing for + ven below, describe the increase in mar . The given pay-off matrix increase i crease in market share. The pay-off matrix share of A and decrease in market share of Determine the optimal strategies for both the companies and value of the game. (Hint: See Example 18] . 12, Acompany is currently involved in negotiations with its union on the upcoming contact. The management group understands the relationship or company strategies to union strategies in the following table. Uys AU, 111 Uy. Uy eo 2 What game value and strategies are available to both group? [Hint: Since the company represents the ‘minimizing player’ and the union the ‘maximizing Player’, we shall recast the pay-off matrix by taking transpose of the given matrix]. 6 4 hoz acre 2 n= 8,m1=0, Bois pp i= ppl ; or ip’ , 10 io 2 1 2 3 2 one = 1. . v= OAs bie 2,11 =0,Bol= gill = 5 lll = 0Gi)u= 1, Payer I= 1, Phyertt=r 3 2 ° 3 a 7 SOvegasre Rue ZnO Bota ge gl 0: Gv = Tp. 4 Ast=on= 2 m= 6,81 7 18” Seanned wek CamScanner338 22 : 3 3 4 Ove FAs es 2 Us 5 ll 08oLe pia 5 5. v = 4, Player A = II, Player B = IIT 6. v=5.75,A41= tiu= 4 3 sl =0,B>1=0,= 4, 11= —= Operations, Research rs Ul=0 5 + G)U =~0.62, 4, I = 0.875, I = 0.125, III = 0 B+ I = 0.375, II = 0.625, III = 0 7. v=377,A5 IV = 0.23, V 8 v=0,Asr1=in=1 2 2 9. v=0Acr=4,n=1, 2 2 »MI=0,B>1= 1 =0,B>1 oe 1n wel no ,I oI = 0, 11 = 0.45, II = 0.55, 1V = 0, V = 0,B > 1=0,11 = 0.77, 11 =9, a = 3 ll=0 Liur=o Benne 10. v = 12.85, A I = 0, II = 0.57, III = 0.43, B > I = 0, IT = 0.71, III = 0.29 4 ue v= 8 asr=0,1- $,m=4,1V=0,v=0,B—41=0,n=0,m= 5 Iv 6 7 V=0,v1=0 47 = ol, AsI= Revs “p54 7 7 1 u=0,m=§,1v=0,B51=0,0= 4+, m= 22, 1v-0 3 13 13 (2) Applications of Modified Dominance Rules: Sometimes in the reduced game matrix after applying rows/column dominance rule, no single row (or column) dominates another row (or column). But however, a row (or column) is dominated by the average of two or more rows (or columns) then that row (or column) is deleted and we get 2 X 2 reduced game matrix and then we solve it. The following examples would clarify the method. Example 19: Using dominance method, solve the game whose payoff matrix is given below. Player B PlayerA Il uM chow aN ARN oaNnes Vv eono — Seanned wek CamScanner| 4 go 07 339 sol080m since all the values of the Rov PS cnet a acne ie I u ul Vv ul 3 4 2 4 MM 4 2 4 o w]o 4 0 8 step Ul: Since all the values of Column I are greater than or equal to the corresponding ‘alues of Column III, Column I is dominated and hence we delete Column I. We get iv, ul] 4 2 4 i 22 4 0 Vie4t 0 6 Step III (Average Method): Now in the reduced matrix, no single row (orcolumn) dominates antochr row (or column). We use average method. We notice that column I1 is dominated by the average of the columns III and IV. That is, WMV ___ Avg. of Ill & IV Col. uy 4 2 4 panne) 2 440 at 22 i) 2: 4 0 2 048 wl] 4 0 8 aan In the above table Col II is dominated by the average of | Col III & IV and hence Col II is mow uf 2 4 mf} 4 0 vy] o 8 Step 1V (Average Method): Again in the reduced matrix, no single row dominates another Y We use ee Sea WE aes that row I is dominated by the average of III & IV Lis mo ied =o my} 4 0 w] 0: 8 Seanned wek CamScanner340 Operations Researey ra A.V. of III & IV Rows Since row II is dominated by the average row ITI and TV, we delete row II. We get mow ul @ ® v [ o 8 This 2 x 2 game matrix has no saddle point. Now we solve the game using odds method: M IV | Odds Probability a2 M 4 0 8 555 pore Vv o 8 f 4 5 Odds 8 4 Probability 8/12 4/12 Value of the Game » = 2%8+0(4) 844 Optimal Strategies with probabilities ion omow 2 1 PlayrA +>] 0 9 2 21 " 33 Coe > | eee ee Sine 3 Example 20. Solve the following game. 8 > PPP > Seanned wk CamScanner341 sottion: Fist of all we will determine whether there is saddle point or not. since the given game does not have a saddle point, the players use mixed strategies. We reduce the game by Dominance method. step I: Since all the values of Row IV are less than or equal to the corresponding value Row Il, we delete Row IV. We get, BB, BB, ala o2 -4 2 al3 1 2 3 Al 3. 2 14 Step II: Since all the values of column TV are more than or equal to the corresponding values of column I, column IV is dominated and hence we delete column IV. We get, By 8, Bs aft 2-1 Als 1 2 A[-1 3 2 Step III: (Average Method): Now in the reduced matrix, no single row (or column) dominates another row (or column). We use average method. We notice that row is dominated by the average of the row II and III. That is, 8, Be Bs af 2 = al 3 1 2 AL -t 3 2 A 1432, 242 Werage of A, +A, Hoag 2e agli the above table row I is dominated by the average of row II & IIT and hence row 1 is leted, We get By A By als 1 2 AL 3 Seanned wiek CamScannerSS i. Step IV (Average Method): Again in the reduced matrix, another column. We use average method. We average of I & II rows. That is no single column domina notice that column III is dominated by Av. of | & II Col. 341 ale & 2 x43 | & 2 Since column 111 is dominated by the average of I & II column, we delete column IIL We get_ B, :. B AID @© 4!@-B This 2 x 2 game matrix has no saddle point and cannot be further reduced. Now we solve, the game by using odds method: Odds Probability 4 4/6 = 2/3 2 216 = 113 Optimal Strategies with probabilities 1 on om PayerA > 0 23 418 0 PlayerB > 13 23 0 0 Example 21. Solve the following the game: Seanned wek CamScanner* 343 wt Theo! son First ofall we will determine whether there isa saddle point or not. solton” . B Since the game does not have saddle point, the players will use mixed strategies. We reduce egame by Dominance method to a2 x 2 size. Step I: Since all the value of Row 1 are < corresponding values of Row Ill, Row I is doninated and hence we delete Row I. We get Step I: Since all values of column 1 > corresponding values of column III, column 1 is dominated and hence we delete column I. We get B Hy cattle ss IV, ul 8 4 Ail 4 8 Vv 8 0 16 Step III (Average Method): Now in the reduced matrix, no single row (or column) dominates Suter row (or column). We use average method. We notice that column IT is dominated by the “erie of the column II and III. That is, B I iy VV Average of Ill and IV Columns 4+8/2=6 a ule 4 8 ti 4 8 0 8+0/2 = 16 0+ 16/2= Seanned wek CamScanneroy . Operations Research, In the above table column II is dominated by the average of column III & IV and hence column 11 is deleted. We get mow il | a4 Fa mi} se oo W|.o} 16 Step IV (Average Method): Again in the reduced matrix, no single row dominates another Tow. We use average method. We notice that row I is dominated by the average of II & IIT rows, That is tH Vv 0 4 8 M 8 o Vv ° 16 Average of ML& IV Rows Sits oe Since row II is dominated by the average of III & IV row, we delete row II. we get i Vv "/ 8 © vVi® Now this 2 x 2 game matrix has no saddle point and cannot be further reduced. Now we solve it by using odds method. B |___IV__ Odds Probability il 16 A ol — 8 i) 16 24 8 Vv 0 16 = if 8 Odds 16 Probabitty 197 8/24 8x16+0x8 128 _16 Value of Game (v) = = “og ay Seanned wiek CamScanneran nus strategies with probabilities PlayerA >| 9 9 PlaerB >| 9 9 2 3 2 3 11 DoMINANCE PRINCIPLE IN Pure Stratecies Game —_—_— TT. Dominance principle may also be used in pure strategi sinvesits. The following example will illustrate the method game in which saddle sample 22. Using the dominance property oblain the of splimal strategies for all b jth the player and determine the value of the game. The pay off matrix for player A is gi given: Player 8 bows Ma yey i) (ae ase ee w]s 6 3 7 8 PlayerA il] 6 7 9 8 7 wl 4 2 8 3 3 Suton: Player B ton om wy I 4.3 6 i 6 @ 7 8 PlayerA Ill ooge a wv] 4 a3 8 In th 2 Wear reasked 5 to use dominance principle. 8 I Soy ‘Since all the elements of row I "Tow Lis dominated and hence delet above matrix, saddle point exist at 6 (cell IH, D, Player B nt Player A Ill are less than or equal to the ed, The reduced matrix is. Vv 8 7 3 Seanned wek CamScanner ut for getting the value of game, corresponding elements= 346 Operations Resear Step 2: Since all the elements of column IV are greater than or equal to the ele : mer corresponding column II, Col IV is dominated and hence deleted. The reduced matriy gt ix is, Player B ou om ov igen 0 4a) PlayerA ih] 6 67 9) 7 Wi ate ! Step 3: Since all the elements of Row IV are less than or equal to the elements of corresponding row III, row IV is dominated and hence deleted. The reduced matrix is. Player B ion om ov He) Beat 09, 0 B PlayerA il] 6 7 9 7 Step 4: Since all the elements of Col V are greater than or equal to the corresponding elements of Col I, Col V is dominated and hence deleted. The reduced matrix is. Player B I u i PlayerA [5 6 3 . my) 6 7 9 | Step 5: Since all the elements of Row II are less than the corresponding elements of Row III, and Row II is dominated and hence deleted. Player B ono PlayerA [6 7 9 Step 6: Since the elements of col. II and III are greater than the element of col. I, col. I! and col. III are dominated and hence deleted wages. Player B 1 Player A Il Value of game =6, Pure Strategies: For A> IIT For BI _ Seanned wek CamScannerge ory ou ri S by using principle of dominanc I Player B 8, 8, B, A, 0 4 3 PlayerA A, a7 3 A, 0 4 4 A 62020 (Hint: R,< Ry C.>Cy C,>C,+C2 R C, C, >C, + C/2] 3. Solve the game by using principle of dominance: Company B A, CompanyA A, Hint: R,< R< Ry, C,>C, C,>CiR, < Rs + RVI 4 Solve the following game: Player B Player A Mine R, < R,, C26, C,20,+6/% Seanned wek CamScanner= 348 Operations Research, 5. Solve the following game: Player B I Wt Vv if4 3 5 1 PlaerA | 4 5 3 5 ul 5 3 5 1 Vv 1 5 1 9 (Hint: R, < R,, C,>C,; C, >C3+C4/2; R2 < R3 + R4/2] 6. Explain the principle of dominance in game theory and solve the following game: Player B on om ow 1[8 10 9 14 PlayerA il | 10 11 8 12 m [1312 1413 [Hint: C,>C,,R, < R, C,>C,+C,2] 7. Solve the game by using principle of dominance: Player B PlayerA I [Hint: R,1 = 0,11 = 0, III = 2/3, IV = 1/3, B91 = 0, I = 1/3, HL = 2/3 IV = 0- 2. v=61/19, A> I = 0, II = 0, III = 5/19, IV = 4/19, B-> 1 = 0, 11 = 0, III = 3/19 1V = 16/19. 3. v=3/2,A>1 = 0,11 = 1/2, I = 1/2, 1V = 0, BI = 1/10, II = 9/10, 111 = 0, IV = 4, v=46/3,A>1 = 0, 11 = 0, III = 1/3, IV = 23, B+ 1 = 0, 11 = 0, HI = 2/3, 1V = 1 5. v=11/3,A>1= 0,11 = 0, IIT = 2/3, 1V = 1/3, B+ 1 = 0, 11 = 0, III = 23, 1V = 6. v=12,A>A,B>B,. 7. v=13/7,A> 1 = 0,1 = 6/7, IL = 1/7, IV =0, B91 = 0, 11 = 0, HL = 47, 1V = 38” , VI=0. Seanned wek CamScanner