1.

Characteristics of Game
Situations
2. Two-person Zero-sum Games
Maximin and Minimax
Strategies
Saddle Point
Dominance Rule
Pure vs. Mixed Strategies
3. Solution of 2 × n and m × 2
Games: Graphic Approach
4. Solution of m × n Games:
Formulation and Solution as LPP
5. Limitations of Games Theory
Deals with decision-making in
situations where
There are two or more rational
players
Who all have a set of strategies each
Who are involved in conditions of
competition and conflicting interests,
and
They are all aware of the pay-offs
resulting from the play of various
combinations of strategies by
different players

The solution to a game calls for

determining optimal strategies for
the players to play
There are two players

Each player has a finite number of

strategies to play

Conditional pay-offs resulting from play

of various combinations of strategies
are known

Each pay-off is a gain for one player and

loss for the other

The solution calls for determining

optimal strategies for each of the
players, whether pure or mixed, and the
resulting value of game
To solve a game we first look for
the saddle point
To check if a saddle point exists:
Find minimum pay-off in each row
Select the largest of the minimum
pay-offs
This is maximin strategy of the
maximising player
Find maximum pay-off in each
column
Select the smallest of these pay-offs
This is minimax strategy of the
minimising player
If the maximin and minimax
strategies have same pay-offs, the
game has a saddle point
(…continued)
If a game has a saddle point, the
maximin and minimax strategies
involved are optimal strategies for the
players and these are called pure
strategies
A game can have more than one saddle
point, resulting in multiple optimal
strategies
If the game has no saddle point, the
players have to play mixed strategies
If value of the game, v = 0, it is called a
fair game
If v > 0, the game favours maximising
player and if v < 0, it favours minimising
player
 Saddle Point = a2b3
Optimal Strategy: A: a2; B: b3
Value of Game = 3

B’s Strategy Row

b1 b2 b3 Minima
A’s Strategy

a1 12 -8 -2 -8

a2 6 7 3* 3

a3 -10 -6 2 -10
Column
Maxima
12 7 3

Saddle Point Minimax

Maximin
 Saddle Points = a2b2 and a2b3
Optimal Strategy: A: a2; B: b2 or b3
Value of Game = 3

B’s Strategy Row

b1 b2 b3 Minima
A’s Strategy

a1 12 -8 -2 -8

a2 6 3* 3* 3

a3 -10 -6 2 -10
Column
Maxima
12 3 3

Minimax
Maximin
 Maximin Strategy = a3, Payoff = 7
Minimax Strategy = b2, Payoff = 9
There is no Saddle Point

B’s Strategy Row

b1 b2 b3 Minima
A’s Strategy

a1 8 5 14 5

a2 22 -6 8 -6

a3 7 9 12 7
Column
Maxima
22 9 14

Minimax Maximin
If it is a 2 × 2 game
Player B
b1 b2
Player A

a1 a11 a12

a2 a21 a22

If A plays a1 with probability x and a2 with

probability 1-x; and B plays b1 with probability
y and b2 with probability 1-y, then
a22 – a21
x = --------------------------------
(a11 + a22) – (a21 + a12)

a22 – a12
y = -------------------------------- and
(a11 + a22) – (a21 + a12)

(a11 × a22) – (a21 × a12)

v = ----------------------------------
(a11 + a22) – (a21 + a12)
 Player B
b1 b2
Player A

a1 8 -7

a2 -6 4

4 – (-6) 2
x = ----------------------------- = -------
(8 + 4) – [(-6) + (-7)] 5

4 – (-7) 11
y = ----------------------------- = ------- and
(8 + 4) – [(-6) + (-7)] 25

(8 × 4) – [(-6) × (-7)] -2
v = ----------------------------- = -------
(8 + 4) – [(-6) + (-7)] 25
Plot expected pay-off of each
strategy on a graph
Locate the highest point in the
lower envelop (in case of a 2×n
game) and the lowest point in the
upper envelop (in case of an m×2
game)
Consider the pair of lines whose
intersection yields the
highest/lowest point and use the
strategies represented by it
This reduces the game to a 2×2
game and it is solved accordingly
Attempt to reduce the order of the
problem by applying dominance
rule

If it can be reduced to a 2×2 game,

solve it accordingly

If it can not be reduced to a 2×2

game, solve it as an LPP
If a strategy is inferior to another, it is
said to be dominated

A dominated strategy can be deleted

If each value in a row (say R1) is greater

than, or equal to, the corresponding
value in another row (say R2), then R1
dominates R2

If each value in a column (say C1) is

smaller than, or equal to, the
corresponding value in another column
(say C2), then C1 dominates C2

A linear combination of two strategies

[for example, αR1 + (1 – α) R2 ] may
also dominate a strategy
(…continued)

B’s Strategy
b1 b2 b3
a1 12 -8 -2
A’s Strategy

a2 6 7 3

a3 -10 -6 2

Step 1: a2 dominates a3. So delete a3

b1 b2 b3
a1 12 -8 -2

a2 6 7 3
(…continued)
Step 2. b3 dominates b1. Delete b1
b2 b3
a1 -8 -2

a2 7 3

Step 3. a2 dominates a1. Delete a1

b2 b3
a2 7 3

Step 4. b3 dominates b2. Delete b2

We are left with a2 and b3 with pay- pay-

off equal to 3. This is the saddle point.
Game value = 3
Games can be formulated and
solved as LPPs

The solution is obtained by simplex

and uses the concept of duality

Before formulation, make sure that

all pay-offs are non-negative

In case of negative values, add

such a constant to all values that
leaves all values non-negative
Sample formulation of a 3×3 game
from maximising player’s point of
view:

Minimise 1/U = X1 + X2 +X3

Subject to
a11X1 + a21X2 + a31X3 ≥ 1
a12X1 + a22X2 + a32X3 ≥ 1
a13X1 + a23X2 + a33X3 ≥ 1
X1, X2, X3 ≥ 0

where Xi = xi/U; xi is the probability that

player plays ith strategy and U is the
value of game
(…continued)

From minimising player’s point of

view

Maximise 1/V = Y1 + Y2 +Y3

Subject to
a11Y1 + a12Y2 + a13Y3 ≤ 1
a21Y1 + a22Y2 + a23Y3 ≤ 1
a31Y1 + a32Y2 + a33Y3 ≤ 1
Y1, Y2, Y3 ≥ 0

where Yi = xi/U; yi is the probability

that player plays ith strategy and V is
the value of game
 B’s Strategy
b1 b2 b3
A’s Strategy

a1 8 9 3

a2 2 5 6

a3 4 1 7

From A’s point of view:

Minimise 1/U = X1 + X2 + X3
Subject to
8X1 + 2X2 + 4X3 ≥ 1
9X1 + 5X2 + X3 ≥ 1
3X1 + 6X2 + 7X3 ≥ 1
X1, X2, X3 ≥ 0
(…continued)

From B’s point of view:

Maximise 1/V = Y1 + Y2 + Y3
Subject to
8Y1 + 9Y2 + 3Y3 ≤ 1
2Y1 + 5Y2 + 6Y3 ≤ 1
4Y1 + 1Y2 + 7Y3 ≤ 1
Y1, Y2, Y3 ≥ 0
Solving the LP formulation from B’s
point of view by Simplex Method
yields:

Y1 = 2/67, Y2 = 3/67, and Y3 = 8/67

1/V = 2/67 + 3/67 + 8/67 = 13/67
and V = 67/13

y1 = 2/67×67/13 = 2/13,
y2 = 3/7×67/13 = 3/13 and
y3 = 8/67×67/13 = 8/13
(…continued)

Further, from the optimal solution

tableau,
X1 = 21/268 X2 = 12/268 and X3 = 19/268
1/U = 21/268 + 12 /268 + 19/268 = 52/268

Therefore,
U = 268/52
x1 = 21/268×268/52 = 21/52,
x2 = 12/268×268/52 =12/52 and
x3 = 19/268×268/52 = 19/52