THE STRATEGIST

29 April,2012
th

The KGPian Game Theory Society

First Edition

STRATEGIES

A BEAUTIFUL MIND

QUIZZES / PUZZLES

LETS PLAY A GAME

here are 5 rational pirates who are looking for a certain treasure chest when they found 100 gold coins. Greedy as they are, they must decide how to distribute them. The pirates have a strict order of seniority: The pirate world's rules of distribution are that the most senior pirate should propose a distribution of coins. The pirates, including the proposer, then vote on whether to accept this distribution or not. If the proposed allocation is approved by a majority or a tie vote, it happens. If not, the proposer is thrown overboard from the pirate ship and dies, and the next most senior pirate makes a new proposal to begin the system again. Pirates base their decisions on three factors . First of all, each pirate wants to survive. Second, given survival, each pirate wants to maximize the number of gold coins he receives. Third, each pirate would prefer to throw another overboard, if all other results would otherwise be equal. The pirates do not trust each other, and will neither make nor honor any promises between pirates apart from the main proposal You are the captain of the ship and hence the senior most. How would you divide the gold so that your life is not at stake? Think for a while. Should you be fair or should you be shrewd? Is it necessary for you to pay everyone or only a few? Think of what the other pirates

might think! Lets name the pirates in order of seniority: Alex (YOU), Billy, Colin, Duncan and Eddie. Consider the case with only 2 Pirates left : Duncan splits the coins 100 : 0 (giving himself all the gold). His vote (50%) is enough to ensure the deal. 3 Pirates: Colin splits the coins 99 : 0 : 1. Eddie will accept this deal (getting just 1 coin), because he knows that if he rejects the deal there will be only two pirates left, and he gets nothing. 4 Pirates: Billy splits the coins 99 : 0 : 1 : 0. By the same reasoning as before, Duncan will support this deal. Billy would not waste a spare coin on Colin, because Colin knows that if he rejects the proposal, he will pocket 99 coins once Billy is thrown overboard. Billy would also not give a coin to Eddie, because Eddie knows that if he rejects the proposal, he will receive a coin from Colin in t h e n e x t r o u n d a n y w a y .

Pirates: You now have the option of being fair and giving considerable amount to each. But will that really help you? Suppose you split the coins 98 : 0 : 1 : 0 : 1. By offering a gold coin to Colin (who would otherwise get nothing if Billy had his way) you are assured of a deal! So u stay alive and Note that in the final deal you should not give a coin to Billy, who knows he can pocket 99 coins if he votes against your proposal and you go overboard. Likewise, you should not give a coin to Duncan, because Duncan knows that if he votes against the proposal, you will be voted overboard and Billy will propose to offer Duncan the same single coin as you. All else equal, Duncan would rather see you go overboard and collect his one coin from Billy. The method that we have used in this popular example is called Backward Induction and is just one of many techniques that are found in the pockets of a game theorist!

AN INTRODUCTION.....
he game you played above is just a tiny example of the principle of Game Theory- Life is a game and you are the player. Every time , the situations in life present a new game to you. But beware! You are not alone! There are many other players and all of them want to maximize their gain. You may adopt any strategy you like but remember that you can only control your move, not your opponents, and the game that you are playing is a part of a much bigger game! Even the dog that wags his tail to your whistle is doing so to maximize his profit, for he knows that soon that obnoxious ape calling his name will throw him a bone out of his plate! You cannot play your opponents move, but you can predict their motives based on your rationale and make the best response possible. You can fool him into misjudging your intentions and make him play the move that you want him to. But only he can play his moves, not you! That is the essence of game theory- To put yourself in your opponent's shoes and maximize your payoff. The games in this theory range from playing Chess to managing your sex life, on field strategies to business decisions, hall politics to wars between nations. All these games require some skill and knowledge but most importantly they require the best strategy. Let's take a look at how strategic thinking helped the legendary investor, Warren Buffet. In an article promoting election campaign finance reform, the Oracle of Omaha, Warren Buffett, proposed raising the limit on individual contributions from $1000 to $5000 and banning all other contributions. No corporate money, no unions, no black money. Sounds great, except that no one would pass it! Campaign finance reform is hard to pass because the legislators that have to pass it are the ones who gain the most from fund raising. How do you get them to do something against their own interests? Put them in what we call the Prisoner's dilemma! According to Buffett:

-Vaibhav Bhargava Well, suppose some eccentric billionaire (not me :P) were to make the following offer: If the bill for this reform was defeated the party that had given the most votes for getting it passed will receive a donation of $1 billion from me. Thus through this diabolic application of Game Theory this bill would pass through easily and our billionaire doesn't need to pay anything! Put yourself in shoes of these parties- the Democrats and the Republicans. If you think that the other party will support the bill and you try to defeat it then you'll only be handling them enough monetary resources to beat you hands down in the next face-off. So no matter what the other party does you'll have to support the bill and yet hope that it doesn't pass! Now since all parties think the same the bill would definitely pass and they all end up losing! That's what game theory can do. Can we adopt a similar strategy for the Jan Lokpal bill? During the cold war of 1962 the Soviet Union under its leader Khrushchev began installing Nuclear Missiles on Cuba, 90 miles from American mainland. A week after he got this news President John F. Kennedy ordered preparations for a naval quarantine of Cuba. Had the Soviet Union accepted this challenge it could have led to an all out Nuclear War. The risk was mutual and deliberately created. After a few days General Khrushchev pulled back in a face saving compromise of withdrawal of US missiles from Turkey. Thus the possibility of a big catastrophe was eliminated by the creation of a bigger mutual risk! It was a battle of minds and Kennedy won! Be it a gambler or a politician, a husband or a Casanova, a clerk or a CEO, a writer or an athlete, a horse or a donkey! It always helps to put yourself in your opponent's shoes, to be able to calculate your profit and make the best move. That's what Game Theory does! As you can see, it's not a separate science but a part of your life.

The KGPian Game Theory Society

THE STRATEGIST

FROM EDITORS DESK

his is a proud moment for us to present the first edition of "The Strategist" (monthly paper on Game Theory )by the Kgpian Game Theory society in the very first year of its foundation (15th June,201114th June,2012). We believe that "The Strategist" will act as a milestone in achieving our goal of spreading awareness about Game Theory and its applications in the campus. In the past also, to spread the knowledge of game theory we used various channels. One of them was the promotion of the online course on Game Theory by Stanford University on behalf of Professor Jackson and Professor Shoham of Stanford University. We believe that if you explore the area of game theory you will be able to make better strategies even in your daily life. In this issue we have incorporated an interactive game, applications of game theory in daily life, the very famous "Prisoner's dilemma", some puzzles and jokes related to game theory. This first issue shall act as an appetizer before the main course. We would like to share with you some of the achievements of the society. We are working on the "Art of Strategy" Project which is suggested to us by Professor Avinash Dixit (Emeritus Professor, Princeton University). We also have a sub group of Algorithmic Game Theory. We successfully conducted 2 Strategia Hubs for generating interest in Game Theory among the students. Recently we conducted "The Finance Talk" in which final year students of IIT Kharagpur who have performed exceptionally well in the competitive exams of CFA, FRM, CAT and Acturial Sciences shared their knowledge and experience. Of course, game theory was a part of that talk in which we tried to correlate Business, Finance and Personal Interviews with Game Theory. We will try our best to fulfill your expectations with "The Strategist". In the next session we will be back with more enthusiasm and will conduct an online game based on Prisoner's Dilemma - Stratage , till then good bye. EDITORIAL BOARD Manoj Gadia (manojgadia.kgts@gmail.com) Pushkar Sathe Soumya Shaw

JOHN NASH
-Vaibhav, Anurag ohn Forbes Nash, Jr. (born June 13, 1928) is an American mathematician whose works in game theory, differential geometry, and partial differential equations have provided insight into the forces that govern chance and events inside complex systems in daily life. He is responsible for giving the most popular concept associated with Game Theory- The Nash Equilibrium. His theories are used in market economics, computing, evolutionary biology, artificial intelligence, accounting, politics and military theory. Serving as a Senior Research Mathematician at Princeton University during the latter part of his life, he shared the 1994 Nobel Prize in Economic Sciences with game theorists Reinhard Selten and John Harsanyi. Nash is the subject of the Academy award winning Hollywood movie- A Beautiful Mind. An example of his simple genius is shown in the bar scene. John is seen at a bar with his friends, ogling at an attractive young blonde who was there with her girlfriends. While his friends talk of each trying individually to impress the beautiful blonde justifying it by adam smith's principal "individual ambition serves common good" that is "best result comes when everyone in the group does best for himself" , john nash proposed a revision in this theory and came up with the explanation that if they all try for the blonde they will block each other - none gets her and then when they try for her friends they will be ignored as no one likes to be a second choice . So the best way for all of them to get a date is to ignore the blonde and try for her friends. It is this incident that is believed to have triggered the idea of his nobel winning thesis on game theory. The idea that in some situations players should not do what is best for them, but what is good for them and best for the group. In years to come, Nash turned game theory, a beguiling idea, into a powerful tool that economists could use to analyze everything from business competition to trade negotiations. Just when he had begun to get international recognition for his extraordinary skills, John nash got sick. And as psychiatric examination would later reveal, he became a victim of schizophrenia, a

mental disorder characterized by a breakdown of thought processes and by poor emotional responsiveness.. Even before his illness John's personal life, like many geniuses before him was not the most stable. In words of Lloyd Shapely, then a graduate student and now a mathematician at the University of California at Los Angeles "He was obnoxious. What redeemed him was a keen, beautiful, logical mind." But the disease turned him into a completely different man. Nash started having hallucinations of imaginary forces trying to hunt him down. He would roam all over Europe trying to hide from them. His family began receiving meaningless letters from him concerning peculiar numbers. Eventually, the Nashes separated and he moved to Roanoke to live with his mother. For two decades the disease stalked him, However Nash made a miraculous recovery in the 1970s. He was able to do maths again! He learnt to neglect his hallucinations and got back into teaching. And so the world rediscovered just how beautiful his mind was. On 11th October 1994, this intellectual warrior was awarded the Nobel Prize in Economics. Prof. Nash and his life will serve as an inspiration for generations to come.

PRISONERS DILEMMA
Game theory helps in making strategies in a conflict-cooperate situation in the form of a mathematical model. A classical and probably the most famous example is The Prisoner's Dilemma. The problem statement in a more familiar flavor can be expressed as follows: Professor GT catches ChaggiMachau and ChaggiPhodu copying from their cell phones in end semester examination from 2 different rooms. In the examination hall cell phones were allowed but only for time keeping. The Professor does not know the mobile phone password and so has no proof against them and can only use strict checking (being stricter as compared to normal fair checking). However, he knows that they both are friends and must be aware of each other's passwords. So he takes them to separate rooms and gives them an offer to tell the other guy's password and get away with a chance to give the exam a week later and fair checking in case they are found guilty. But if they are found guilty and they don't help the professor (by not cooperating with the Professor) then they will be deregistered. Both ChaggiMachau and ChaggiPhodu have 2 options Cooperating with the Professor (by telling their friend's password) or cooperating with their friend by not revealing their password. What should be the Professor's strategy to make the chaggis' confess? Consider the following assumptions about the payoffs: Let payoff of ChaggiMachau be -1 when Professor GT does not know his password and he passes in the exam but with strict checking and -10 when professor knows the passwordand hencethe Chaggi guy will then be de registered . But if he reveals ChaggiPhodu's password then he will be allowed to give a reexamination with a fair checking scheme, let the payoff in this situation be 0 as he gets a new chance to score. Professor GT analyses the situation by stepping into the shoes of the chaggis. In particular consider the case of chaggimachau 1 An analysis by game theory suggests that the best thing for ChaggiMachau is to help the professor. Why?
chaggimachau ,chaggiphodu protecting friends password revealing friends password protecting friends password (-1,-1)

- Anurag Sharma Consider if ChaggiPhodu protects the password of ChaggiMachau then the best strategy for ChaggiPhodu would be to reveal his friend's password (since 0 in this
revealing friends password

(-10,0) (-5,-5)

(0,-10)

case would be more than -1 when he also protects the password). If now say ChaggiPhodu reveals the password then the best strategy for ChaggiMachau in this case will be again to reveal his friend's password (since -5 in this case is better than 10 when he protects the password). This implies that no matter what ChaggiPhodu does ChaggiMachau must cooperate with the Professor by revealing his friend's password and this in Game Theory is known as Dominant Strategy where player 1's best response does not depend on player 2's actions. Since the above matrix is a symmetric matrix we can apply similar logic for ChaggiPhodu also. Clearly for both a dominant strategy is best, so ChaggiMachau must realize that in case ChaggiPhodu reveals his password and he does not, his situation will be worst off , this is exactly what goes in the mind of ChaggiPhodu and so despite (-1 ,-1) being the best option for both by cooperation , they are forced to come down to (-5, -5) due to fear of a worse payoff of (-10) and an attraction towards a better payoff of (0) if it may happen. The point from which a deviation will hurt both players is called a NASH equilibrium point and in this game we have (-5, -5) as the Nash Equilibrium point.

The KGPian Game Theory Society

THE STRATEGIST

IPL AUCTION
-Manoj Gadia ummers are here and the tournament that everyone has been waiting for , the DLF Indian Premiere League -5 has already begun. In this article we would like to take you back to the time when it all began. India had recently won the ICC T20 World Cup and the 20-20 fever had gripped the nation. The result was just the right mixture of cricket, glamour and entertainment The IPL. It was decided that there would be 8 teams and the players would be auctioned off to the highest bidder, the team owners being some of the best business minds in the country. The auctions took place and the winning bidders for the eight franchises were announced on 24 January 2008. While the total base price for auction was US $400 million, the auction fetched US $723.59 million. Many young cricketers turned millionaires. Almost all the ivy league players went for prices well above their base price. The exception was Ricky Ponting. Ponting was the captain of arguably the best one day team of all time, and a match winning batsman. All through his career Ponting has been consistently ranked in the top-ten batsmen in both One Day International cricket and Test matches in the official ICC ratings, and has been ranked number one for substantial periods. He was the Wisden Leading Cricketer in the World in 2003 and one of the five Wisden Cricketers of the Year for 2006. He has been the Allan Border Medalist three times in 2004, 2006 and 2007 which is a record. Under his captaincy Australia had won 2 consecutive World Cups. He was named Australia's best test player in 2003, 2004 and 2007 and Australia's best One Day International player in 2002 and 2007. Many predicted that he would go for a million dollars, if not more. However he went to the Kolkata Knight Riders for a base price of $400,000. Except for icon players there were some players whose auction price was much higher than Ricky's. Yousuf Pathan (US $50000), Harbhajan Singh (US$ 850,000), Robin Uthappa (US$ 800,000), Jacques Kallis (US$ 900,000), Andrew Symonds (US$ 1.35 million), RP Singh (US$ 875,000), Ishant Sharma (US$

950,000) to name a few. Surely something went wrong. How is it that none of the franchisee but one showed any interest in purchasing Ponting. It's clear by auction price and record & importance of Ricky Ponting, there is some co-operation between eight franchises. Now the question is why is it so?

To answer this let us consider the payoff matrix of KKR and another franchisee say X when it comes to auction of Ponting. KKR/Franchiseex BET DONT BET BET -150,-150 0,250 DONT BET 0,0 0,0

The table contains payoff (utility) to the franchisee against their corresponding actions in 1000 US$.

It seems that there was a general awareness that Kolkata Knight Riders wanted Ponting. Their instantaneous call and 1st movemade it clear that they had set their mind to take Ricky Ponting. The other participants, being the rational businessmen, realizedthis fact and must have thought that if they went for the bet then the auction price might go high. In that case, Ricky is not profitable for any one, in fact it is dangerous for them. If due to too many raises Kolkata Knight Riders can reset their mind to leave Ponting and use Tit for Tat strategy for other players. Here there is room for only one player who moved 1st and that is exactly what was done by Kolkata Knight Riders. The strategy used here is called the 1st Mover's Advantage. - Deepant Kandoi

GAMES OF THRONES

That's all for today everyonewe will stick to our plan then. (Everyone leaves..) Player 1: A word with you, Grace. Player 2: You do not have to call me Grace when no one is around. Player 1: It's not so bad once you get used to it!!!! What does the above conversation tell you about the nature of the players? Well, one can surely say, if nothing else, that they are rational players. Why? If one analyses the three statements carefully and the key words involved in them: Grace, when no one is around, Once you get used to it, it clearly shows that there is some close relationship between the players and both of them want to keep their relationship intact. Also, one of them has got a higher rank as compared to the other. Even though Player 2 has got a higher rank he wants to convey that as you are my brother you don't need to call me Grace when no one is around but remember that when others are around you must maintain the discipline. Thus, the player 2 has saved his honor of King and also the relationship with his brother in a very strategic manner. Similar reasoning goes for Player 1 also, he has maintained good understanding with his brother by respecting his position (after all it's not wise to be against the King).Well, that's what game theory is all about. It gives you a clear understanding of the situations and helps you in deciding your best possible response. NOTE: Above conversation has been taken from the TV series Game of Thrones (Season 2, Episode 1)

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The KGPian Game Theory Society

THE STRATEGIST

THE BATTLE OF GRADES (Original Idea)

rofessor P. Mishra wants to improve the results of his class by improving the understanding of his subject among the students. But due to the class size and time constraint he can't entertain the doubts of all the students, so Professor Mishra consulted KGTS to make a strategy which would help him to improve the results of his class. Wait! Just think for a while and make a strategy for Professor P. Mishra. OK, let us together make a strategy. One of the problems of the Professor is large class size, can we use this to make a strategy to improve the average performance of the class? Yes, we can. If the students who understood the lecture can help those who didn't it will solve the problem. We know that in general the helping nature of people increase if there is some benefit associated with it. But how? Eureka, got it!!! Let me explain how this will work with an example: Ram is a student. Let the number of students who got more marks than Ram is x, and those who got less than Ram is y. Let us define t as min(x,y). Now we consider t nearest students to Ram who have got more marks than Ram. Calculate the average marks of these t students and subtract Ram's marks from

-Manoj Gadia

this average. Lets call this number p. Now from Ram's marks we subtract the average marks of those t nearest students to Ram who scored less than Ram, call this q. If p-q is positive, then we give Ram w*(p-q) as the additional incentive marks. w is the degree of benefit which lies between 0 and .. Analyze this from Ram's point of view: Ram wants to improve his grade. For this he can improve his personal marks and secondly his benefit [w*(p-q)]. Since w < , he should score as high marks as he can because the loss from getting lower marks is more than the benefit from getting additional incentive marks (in the process of increasing p). Suppose he sticks with his marks and help those who are not able to understand in the class in this way he decreases q thus improving the class average marks as well as his additional benefit marks. So it makes beneficial for those who understood well to help those who didn't and thus our problem is resolved. Professor Mishra implemented this strategy and is now happy with the improved performance of his class.

A Loosing Strategy that Wins-PARRONDOS PARADOX

-Sahil Dhingra arrondo's paradox is a paradox in game theory. It is named after the Spanish physicist Juan Parrondo whodiscovered it in 1996. It states that when two games which are guaranteed to make a player lose all his money will generate a winning streak if played alternately. A more explanatory description is:There exist pairs of games, each with a higher probability of losing than winning, for which it is possible to construct a winning strategy by playing the games alternately. The paradox is illustrated by two games played with weighted coins. The coins are weighted so as not to fall evenly by chance to heads or tails.In game A, a player tosses a single loaded coin and bets on each throw. The probability of winning is less than half. In game B, there are two weighted coins. Both are loaded, one to lose badly and one to win slightly, with the upshot being that anyone playing this game will eventually lose all his money. The player plays Coin 1 if his money is a multiple of a particular whole number, like three. If his money cannot be divided by the number three, he plays the Coin 2.The probabilities of the weighted coins are such that both the games, when played individually are losing games. However, when these two losing games (A and B) are played in some alternating sequence the combination of the two games is, paradoxically, a winning game.One must note that not all alternating sequences of A and B result in winning games. The sequence depends on the probabilities of winning in both the cases individually.

This coin-tossing example has become the acknowledged illustration of Parrondo's paradox two games, both losing when played individually, become a winning game when played in a particular alternating sequence. The individual games are losing only under a distribution that differs from that which is actually encountered when playing the compound game. Parrondo's paradox is used extensively in game theory, and its application in engineering, population dynamics, financial risk, etc., are also being looked into. It can be used to explain why investing in losing stocks can sometimes lead to greater capital gains. Some finance textbook models of security returns have been used to prove that individual investments with negative median long-term returns may be easily combined into diversified portfolios with positive median long-term returns. Similarly, a model that is often used to illustrate optimal betting rules has been used to prove that splitting bets between multiple games can turn a negative median long-term return into a positive one. The paradox may also be used to shed light on social interactions and voting behaviours'. For example, President Clinton, who at first denied having a sexual affair with Monica S. Lewinsky (game A) saw his popularity rise when he admitted that he had lied (game B.) The added scandal benefitted Mr. Clinton and he remains one of the most popular politicians in the world.

The KGPian Game Theory Society

THE STRATEGIST

POKER AND GAME THEORY

f you are a poker player, you are already a game theorist, whether you realize it or not.Improving your understanding of game theory, and how it applies to logical reasoning, will help you improve your poker game as well. In game theory, a model of a competitive situation is called a game and the participants are called players. A poker game is a near perfect model for applying the principles of game theory. Before every action, you make an evaluation of the competitive situation that you are facing. Based upon your ability and level of information about the situation, you come to a conclusion about which of your options would be your best course of action. poker is a competitive event, with static rules, and all players theoretically doing their best to act in their own best interest. Each time a player is faced with a decision, they must do so within the confines of the rules, and base their decision upon the likely action of their opponents. In a poker game, these actions are check, bet, call, raise, and fold. Each time that you select one of these actions, you are affecting the outcome of the game. Each time you select the correct action, you improve your prospects for success over the long run, and each time you fail to do so, you hurt your prospects. The key to success in poker is to consistently select the correct action when it is your turn to act. The more that you know about the game, and about your opponents tendencies and thought processes, the more deeply strategic your actions become. The more adept you are with game theory, the more prepared you are to handle these strategic decisions. If you bet only when you have a strong hand, the other players will soon figure this out.

-Akshat Goyal, Saurabh Bargujar

In response to a raise, most other players will fold, and you'll never win a big pot. Those who raise back will have even stronger hands, and so you'll end up being a big loser. To get others to bet against a strong hand, they have to think you might be bluffing. To convince them of this possibility, it helps to bet often enough so that you must be bluffing some of the time. You'd like others to fold against your bluffs and thereby win with weak hands. But that won't lead to high-pot victories. To convince others to raise your bets, you also need to get caught bluffing!This necessarily leads to more positive outcomes over the long run. In a nutshell, you outplay your opponents, and become a better poker player, by adding an understanding of game theory to your analytical tool kit.. .

METRICATION IN THE UNITED STATES

- Pushkar Sathe The United States of America is notorious for its reliance on the arbitrary imperial system even after so many years. It is one of the three countries that have not changed to this more efficient method of measuring. The fact that the USA was not able to make such a small change even though the first attempts towards metrication took place in the late 19th century is almost incredible! To understand why they are stuck, we need to understand what their payoffs are. In a simplified case, let's think about people only. Currently both are stuck in the old system of measurement. It is known that changing to the metric system will lead to closer integration with the world and long term benefit. So the payoff has been arbitrarily assigned to be higher than the old system. person1/person2 Metric Imperial Metric 2,2 0,0 Imperial 0,0 1,1

POEM ON GAME THEORY

In Life's matrix of possibilities, outcomes can be reduced to an array For the mixture of cursing and blessing correlates directly to choices not carefully weighed. With God on one axis and Satan on the other, challenges from many of Life's trials have various payouts, from one cell to another. From the earthly consequences, which are the result of our actions, we're ultimately responsible and not saved by divine intervention. Avoiding the repetitions of mistakes until we learn to properly play, requires heed to spiritual instruction For our Salvation awaits the day. When it comes to being Godly people, let us not grow weak and weary; within our grasp is a winning strategy that supersedes this World's... game theory. Posted by Joseph J. Breunig on www.holypal.com

Now we can see that if only 1 person changes, communication about the weather , quantity of food, and such other daily needs will be more difficult (0,0). So for the metrication to be effective, both should change to metric system. This is very difficult to achieve in a large population, where people can choose which system to use. If we think more broadly, it's not just the people, but many important documents that need changing as well - and this adds to the cost. Through this example we can see how large problems can be easily understood using a game theoretical point of view. Governments need to recognize this and make a policy that can change the payoffs to common people and thus facilitate change.

The KGPian Game Theory Society

THE STRATEGIST

JOKES CORNER
The dumbest kid in the world
A young boy enters a barber shop and the barber whispers to his customer, This is the dumbest kid in the world. Watch while I prove it to you. The barber puts a dollar bill in one hand and two quarters in the other, then calls the boy over and asks, Which one do you want, son? The boy takes the quarters and leaves. What did I tell you? said the barber. That kid never learns! Later, when the customer leaves, he sees the same young boy coming out of the ice cream store. Hey, son! May I ask you a question? Why did you take the quarters instead of the dollar bill? The boy licked his cone and replied, Because the day I take the dollar, the game is over!

-Poorva Shevgaonkar

The dead donkey

A city boy, Kenny, moved to the country and bought a donkey from a farmer for $100. The next day the farmer delivered the donkey. Sorry son, the farmer said, the donkey died. Kenny asked for his money back, but the farmer said he already spent it. Kenny said, OK, then, just unload the donkey. I'll raffle him off. A month later the farmer met up with Kenny, who said he sold 500 raffle tickets at $2 each and made a profit of $898. Didn't anyone complain because the donkey was dead? the farmer asked. Just the guy who won, Kenny explained, So I gave him his two dollars back!

RACK YOUR BRAINS !

We leave you with some questions to ponder on. Remember to apply the key concept of game Theory. Always put yourself in the opponent's shoes and then make your move. MERGERS AND ACQUISITION There is a Chinese company in which two of the foreign companies want to buy share due to their expansion needs in the Chinese market. One company of them is 100 times larger than the other. Quick reference of their profiles is as follows. BIG COMPANY- Very big company FMCG Firm of Europe, Net revenue of 10000 millions dollars. SMALL COMPANY- Company with 100 million dollars net revenue. Q1. 80% is with the admin family and 5% is with the smaller company due to a past partnership Big Company quoted the price 4.2$ per share with upper bound 10%. Small Company quoted the price 3.5$ per share with upper bound 7.5%. Open markets expected price 3.7$ per share. How should the Chinese company sell their shares to them . A) 5 each b) 7.5 to large and 2.5 to small c) 9% to large and 1% to small d) 1% to the large and 9 % to the smaller one e) sell in the open market Q2. Chinese company needs some money for their projects . So they are selling 10% of their shares What should be their best strategy? a) Fix the share price and tell both companies to negotiate between themselves that which one of them will be taking all the shares(10%) b) Threaten both of them that they will release all of the 10% shares in the open market where they expect the share prices will be higher. c) Ask both of the companies to bid among themselves for the 10% shares d) Give 2.5% share to each of the companies at open market price and tell them to bid for the remaining 5% shares Small company - 24.9% shares Company owners - 31.0% shares Open market - 18.7% shares There is a rule in the asian markets that if they gain more than 30% of the shares then they have to go all the way to get the whole of the company and get atleast 90% of the shares. Big company and small company are both interested in buying the whole company. If they exceed 30%, they will legally have to acquire the 90% of shares of chinese company. The best strategy for the big company to acquire more than 30% share would be a) Big company tries to buy from the open market. b) pressurize the chinese company for additional shares. c) Bigger company tries to buy from the smaller company. d) Waits for a move from the chinese company. Mail you answers to : the.kgts@gmail.com and get rewarded Q3. Take a scenario as mentioned below : Current share size in the chinese company Big company - 25.4% shares

ATTENTION 1st AND 2nd YEARS !!!

The KGPian Game Theory Society announces selection for its Academic, Web, Design and Literary Teams
DATE; 14th April TIME: 6 pm VENUE: HSS Department

ACTING VICE PRESIDENT Deepant Kandoi Sahil Dhingra DESIGN Harika Kavali Shipra Sinha WEB Santhosh Lakkanpalli Poorva Shevgaonkar

Interested should fill the form at http://tinyurl.com/kgts-team. Follow us to stay updated at http://www.facebook.com/The.KGTS To know more about game theory visit : http://gametheory.net/ , http://gametheorysociety.org/ Note: This is the last opportunity for present 2nd years to join KGTS. Don't miss it!

Contact Ayush Sureka: 8653807607 Anurag Sharma: 7699578295 Vaibhav Bhargava: 8001060658 Mail to : the.kgts@gmail.com

SPONSORSHIP Aayush Anurag Akshat Saurabh Vaibhav Vibhor Sachin Udit