UNIT-III

Assignment Model & Game Theory

Assignment model : Hungarian Algorithm and
its applications, Maximization Assignment
Problem.
Game Theory : Concept of game, Two person
zero sum game, Pure and Mixed Strategy
Games, Saddle points, Odds Methods ,
Dominance Method and Graphical Method for
solving Mixed Strategy Game.
 Assignment Model
Assignment problem is a special type of linear
programming problem which deals with the
allocation of the various resources to the various
activities on one to one basis. It does it in such a
way that the cost or time involved in the process
is minimum and profit or sale is maximum.
Though there problems can be solved by simplex
method or by transportation method but
assignment model gives a simpler approach for
these problems.
Continued…………….
Continued…………….
In a factory, a supervisor may have six
workers available and six jobs to fire. He will
have to take decision regarding which job
should be given to which worker. Problem
forms one to one basis. This is an assignment
problem.
Examples of Assignment , in assigning
salesman to different regions, vehicles and
drivers to different routes, products to
factories, jobs to machines, contracts to bidder
and research problems to teams , etc.
 Objectives of Assignment
 No workers is more than one job.
 No job is allotted to more than one worker.
 Total time taken to complete a job is minimum.
 The work done is cost effective.
 The Hungarian Method for Solution of
the Assignment Problems
OR
Hungarian Algorithm and its Application
The Hungarian method suggested by Mr. Koing
of Hungary or the Reduced matrix method or
the Flood’s technique is used for solving
assignment problems . It is quite efficient for
finding an optimal solution of an Assignment
Problem. The method consist of the following
steps:
1. Prepare a Square Matrix.
2. Reduce the Matrix.
3. Check whether an Optimal Assignment can
be made in the reduced matrix or not.
4. Find the minimum number of lines crossing
all zeros.
5. Iterate towards the optimal solution.
6. Make Assignment.
 Find the optimal solution for the assignment
problem with the following cost matrix:

Salesman Area
P Q R S
A 11 17 8 16
B 9 7 12 6
C 13 16 15 12
D 14 10 12 11
 Self Practice
A departmental head has four subordinates and
four tasks to be performed. The subordinates
differ in efficiency and the tasks in their
intrinsic difficulty.
Subordinates Tasks
I II III IV
A 8 26 17 11
B 13 28 4 26
C 38 19 18 15
D 19 26 24 10
 Optimal Solution of An Assignment
Problem
Solve the Following Minimal Assignment
Problem:
Men Jobs
I II III IV V
A 2 9 2 7 1
B 6 8 7 6 1
C 4 6 5 3 1
D 4 2 7 3 1
E 5 3 9 5 1
 A city corporation has decided to carry out road
repairs on main four arteries of the city. The
corporation has floated tenders and five contractors
have sent their bids.
Contractors Cost of Repairs
R1 R2 R3 R4
C1 9 14 19 15
C2 7 17 20 19
C3 9 18 21 18
C4 10 12 18 19
C5 10 15 21 16
(I) Find the best way of assigning the repair work to the
contractors and the costs.
(II) Which of the five contractors will be unsuccessful in his
bid.
 Maximization Assignment Problem
If maximization of profit, revenue or sales is given
then maximization objective function is given. For
solving such types of problem firstly convert it
into minimization in following ways-
 Locate the largest payoff element in the
assignment table and then subtract all the
elements of the table from the highest element.
Five salesman are to be assigned to five
territories. Based on past performance , the
following table shows the annual sales (in
Lakhs) that can be generated by each salesman.
Find the optimal assignment-
Salesmen Territory
T1 T2 T3 T4 T5
S1 26 14 10 12 9
S2 31 27 30 14 16
S3 15 18 16 25 30
S4 17 12 21 30 25
S5 20 19 25 16 10
 Travelling Salesman Problem
There are various types of routing problem
which occur in a LPP. The most widely
discussed problem is the travelling salesman
problem. The TSP may be solved as an
assignment problem with two additional
condition .
In this tour the objective is to minimize
either the total distance travelled or the cost of
travel.
 Self Practice : TSP
A travelling salesman has to visit five cities. He
wishes to start from a particular city. Visit each city
and then return to his starting point. The travelling
cost of each city is given below-

From City To City

A B C D E
A - 2 5 7 1

B 6 - 3 8 2
C 8 7 - 4 7
D 12 4 6 - 5
E 1 3 2 8 -
Game Theory
 Game Theory
The mathematical theory of games was
developed by Jhon Von Neumann and Oskar
Morgenstern in their famous work titled “ The
Theory of Games and Economic Behaviour” in
1944.
In a competitive business world one of
the most relevant problem of the executive is to
study or at least guess, the activities or actions
of his competitors. The competitors are called
players. A player may be an individual , a group
of individuals or an organization.
for Example , two or more candidates contesting
an election with the objective of winning with
more votes. A market director while introducing
a new product would take to know the best
possible strategies or a combination of strategies
to capture a higher share of the market when a
competitor is also trying to introduce a similar
product with different strategies. Some of the
strategies the marketing director could think of
are reduction in price, gift scheme, advertising,
superior quality, 20% extra etc.
 Practical Application of Game Theory
Game theory has found its application in various
fields such as Economics, Social Science, Political
Science, Biology, Computer Science, Management.
Some examples are as follows-
 One of the most common examples in an industry
is the management – worker bargaining over wage
payments, condition of work, fringe benefits and so
on.
 Bilateral monopoly is an analogous state of affairs,
involving bargaining between a monopolistic buyer
of a product and monopolistic seller.
 A duopolist’s strategy consists of selecting a
particular value of each of the variable under
his control: (a) changing the price (b) changing
advertising expenditure (c) changing the
quality of product.
 The conflict between alternative political
parties, or in a single party between alternative
power centers.
 Concepts / Important Terminology of
Game Theory
 Game: Any set of circumstances that has a result
dependent on the actions of two or more decision-
makers (players)
 Players: A strategic decision-maker within the
context of the game
 Strategy: A complete plan of action a player will
take given the set of circumstances that might
arise within the game
❖A strategy is said to be pure if it at every stage in
the game it specifies a particular move with complete
certainty.
 Strategy: Travel Example
In this ‘game’ a ‘player’ is a commuter who is
returning home from work – their objective is to
return home as soon as possible. They can
choose between train, bus and subway
The first choice is ‘catch the train’, the
second choice is ‘catch the bus’ and so on. A
commuter who always chooses to catch the train
is following a ‘pure’ strategy.
A commuter who sometimes picks the
train and sometimes the bus is following a
‘mixed’ strategy.
❖ A strategy is said to be mixed if it applies
some randomization to at least one of the
moves.
 Equilibrium: The point in a game where both
players have made their decisions and an
outcome is reached.
 Optimal strategy: A course of action or plan
which puts the player in the most preferred
position irrespective if the strategy of his
competitors, is called an optimal strategy. Any
deviation from this strategy results in a decreased
pay-off for the player.
 Payoff: The payout a player receives from
arriving at a particular outcome. The payout can
be in any quantifiable form
 Information set: The information available at a
given point in the game. The term information
set is most usually applied when the game has a
sequential component.
 Value of the game: it is the expected pay –off of
the play when all the players of the game follow
their optimal strategies. The game is called fair if
the value of the game is zero and unfair if it is
nonzero.
 Classification
oTwo-Person Game– Agame with 2 number of players.
oN-Person Game– Agame with N number of players, where >2.
oZero-Sum Game – A game in which sum of amounts won by all
winners is equal to sum of amounts lost by all losers.
oNon-Zero Sum Game – A game in which the sum of gains and
losses is not equal.
oPure-Strategy Game – A game in which the best strategy for each
player is to play one strategy throughout the game.
oMixed-Strategy Game – A game in which each player employs
different strategies at different times in the game.
 Decision making

Under Uncertainity Under Risk Under Certainity

Non Competitive Competitive

Situations situations (Games
Theory)

Pure Strategy Mixed Strategy

(Saddle Point exist)

2*2 Strategies 2*n or 2*m strategies M*n strategies

Game (Arithmetic game (Graphical (Linear
Method) Method) Programming
Method)
 Zero Sum Game
A zero sum game is a game in which the interests
of the players are diametrically opposed, i.e., the
gain to one player is exactly equal to the loss to
another player, so that the sum of gain and loss
equal to zero.
Assumptions of the Game
o The gain of one player is the net loss of the
other player.
o each player works with full confidence and
presence of mind and tries of minimize possible
losses.
 Two Person Zero Sum Game :
Saddle Point / Minimax and
Maximin Principle
Saddle Point : A saddle point of a pay off matrix
is that position in the matrix where the maximum
of row minima coincides with minimum of the
column maxima. The cell entry at this position is
called value of game and this position is called
saddle point and game is said to be strictly
determined.
 Rules to Determine Saddle Point
1. Select the minimum element of each row of the
pay off matrix and write them under row
minima heading. Select the largest element
among these elements and enclose by
2. Select the maximum element of each column
of the pay off matrix and write them under
column maxima. Select the smallest element
among these elements and enclose it by
3. Find out the element which are same in
and circle and mark the position of such
element by
 Two Person Zero Sum Game : Saddle
Point
The payoff matrix of a game is given below.
Find the solution of Game:
Player A Player B
B1 B2 B3 B4 B5
A1 -2 0 0 5 3
A2 3 2 1 2 2
A3 4 -3 0 -2 6
A4 5 3 -4 2 -6
 Self Practice
Solve the following Game-
Player A Player B
B1 B2 B3 B4
A1 1 5 4 2
A2 2 3 5 3
A3 3 4 5 3
 2X2 Game without Saddle Point
In certain cases , there is no saddle point i.e.,
there are mixed strategy exists. Here we shall
determine the probabilities with which each
should be selected. Consider the following game:
Player A Player B
BI BII
AI 3 1
AII 2 4
 Principle of Dominance
The Principle of Dominance states that if the strategy of a player
dominates over the other strategy in all condition, the later strategy can be
ignored because it will not affect the solution in any way. A strategy
dominates over other only if it is preferable over other in allconditions.
Following rules are used to reduce the sizeof pay-off:
Rule 1: If all the elements in a row of a pay-off matrix are lees than or
equal to the corresponding elements of other row then the player A will
never choose that strategy. So, former strategy is dominated by latter
strategy.
Rule 2: If all elements in a column in a pay-off matrix are greater than
or equal to the corresponding elements of other column then B will never
choose that column or former strategy is dominated by latter strategy.
 Rule 3: A Pure Strategy may be dominated if it is inferior
to average of two or more other pure strategies.
These rules could be better understood with the help of
the followingexample:

B1 B2 B3 B4
A1 7 6 8 9
A2 -4 -3 9 10
A3 10 2 -5 0
In this, B3 is dominating B4 which gives lesser loss in all
conditions. So, B4 is redundant ignoring this, the effective
pay-off will be:
 B1 B2 B3 Row
minima
A1 7 6 8 6
A2 -4 -3 9 -4
A3 10 5 -2 -2
Column 10 6 9
maxima

Now, the saddle point is where A’s

optimum strategy is A1 and of B is B2 and
value of game is 6 on following the rule of
dominance. so, A cannot gain more than 6
and Bcannot loose less than6.
Solve the following Game Whose payoff matrix
with respect to player A is given below-
(a) 2 8 2
8 3 8
5 3 7

(b) 1 7 3 4
5 6 4 5
7 2 0 3
Mixed Strategies : Methods of Solving
Game
In case where there is no saddle point and
dominance has been used to reduce the game
matrix, player will resort to mixed strategies. A
few methods can be used to optimize the
winning of each player and solve the game.
There are two such popular method for this
purpose.
(1) Arithmetic Method or Odds Method
(2) Graphical Method
 Arithmetic Method or Odds Method
This method provides easy calculation for finding
optimum strategies as well as game value for 2X2
game. It consist following step-
(1) Subtract the two digits in column 1 and write
the difference under column 2, ignoring sign.
(2) Subtract the two digits in column 2 and write
the difference under column 1 , ignoring sign.
(3) Similarly proceeds for the two rows.
These values are called oddments. They are
the frequencies with which the players must use
their course of action to optimize strategies.
 Dominance and Odds Methods
Solve the following Game:
Player A Player B
I II III IV
I 3 2 4 0
II 3 4 2 4
III 4 2 4 0
IV 0 4 0 8
 Self Practice
Two companies ABC and XYZ are competing for an
increased market share. The payoff matrix shows the
following strategies. Simplify the problem by the rule of
dominance and obtain optimal strategy for both the
manufacturers and the value of Game.
XYZ
Maintain
Increase
Give Coupons Decrease Price Present
advertising
Strategy
Give
Coupons 2 -2 4 1
Decrease
Price 6 1 12 3
ABC
Maintain
Present
Strategy -3 2 0 6
Increase
advertising 2 -3 7 1
 Graphical Method for Solution
Graphical method is applicable to only those
games in which one of the player has two
strategies only. It reduces the 2Xn or mX2 game
to 2X2 matrix size by identifying and
eliminating the dominated strategies and then
solve it by analytical methods. The method is
interesting as it explains the idea of the saddle
point graphically.
 Graphical Method
Solve the following game whose payoff matrix
is
Player B
Player A B1 B2 B3 B4 B5
A1 3 0 6 -1 7
A2 -1 5 -2 2 1