UNIT – V: Solving Two-Person and Zero-Sum Game

Game theory deals with decision situations in which two intelligent opponents with conflicting
objectives are trying to outdo one another. Typical examples include launching advertising
campaigns for competing products and planning strategies for warring armies.
In a game conflict, two opponents, known as players, will each have a (finite or infinite) number
of alternatives or strategies. Associated with each pair of strategies is a payoff that one player
receives from the other. Such games are known as two-person zero-sum games because a gain by
one player signifies an equal loss to the other. It suffices, then, to summarize the game in terms
of the payoff to one player. Designating the two players as A and B with m and n strategies,
respectively, the game is usually represented by the payoff matrix to player A as
B1 B2 ----- Bn
A1 a11 a12 ----- a1n
A2 a21 a22 ----- a2n
----- ----- ----- ----- -----
Am Am1 a12 ----- amn
The representation indicates that if A uses strategy i and B uses strategy j, the payoff to A is aij'
which means that the payoff to B is -aij'

Two-person zero-sum games may be deterministic or probabilistic. The deterministic games will
have saddle points and pure strategies exist in such games. In contrast, the probabilistic games
will have no saddle points and mixed strategies are taken with the help of probabilities.
Definition of saddle point
A saddle point of a matrix is the position of such an element in the payoff matrix, which is
minimum in its row and the maximum in its column.

Procedure to find the saddle point

 Select the minimum element of each row of the payoff matrix and mark them with
circles.
 Select the maximum element of each column of the payoff matrix and mark them with
squares.
 If their appears an element in the payoff matrix with a circle and a square together then
that position is called saddle point and the element is the value of the game.
Solution of games with saddle point
To obtain a solution of a game with a saddle point, it is feasible to find out
 Best strategy for player A

Prepared by: Mr. R A Khan, Visiting Faculty Page 1

  Best strategy for player B
 The value of the game
The best strategies for player A and B will be those which correspond to the row and column
respectively through the saddle point.
Optimal Solution of Two-Person Zero-Sum Games
Because games are rooted in conflict of interest, the optimal solution selects one or more
strategies for each player such that any change in the chosen strategies does not improve the
payoff to either player. These solutions can be in the form of a single pure strategy or several
strategies mixed according to specific probabilities. The following two examples demonstrate the
two cases:-
Two companies, A and B, sell two brands of flu medicine. Company A advertises in radio (Ad,
television (A2 ), and newspapers (A3 ). Company B, in addition to using radio (Bl ), television
(B2), and newspapers (B3 ), also mails brochures (B4 ). Depending on the effectiveness of each
advertising campaign, one company can capture a portion of the market from the other. The
following matrix summarizes the percentage of the market captured or lost by company A.
Player B
B1 B2 B3 B4
Player A

Radio TV Newspaper Social media

A1 Radio 8 -2 9 -3
A2 TV 6 5 6 8
A3 Newspaper -2 4 -9 5
The solution of the game is based on the principle of securing the best of the worst for each
player. If Company A selects strategy A1, then regardless of what B does, the worst that can
happen is that A loses 3% of the market share to B. This is represented by the minimum value of
the entries in row 1. Similarly, the strategy A2 worst outcome is for A to capture 5% of the
market from B, and the strategy A 3 worst outcome is for A to lose 9% to B. These result are
listed in the "row min" column. To achieve the best of the worst, Company A chooses strategy
A2 because it corresponds to the maximin value, or the largest element in the "row min" column.
Next, consider Company B's strategy. Because the given payoff matrix is for A, B's best of the
worst criterion requires determining the minimax value. The result is that Company B should
select strategy B2.
The optimal solution of the game calls for selecting strategies A2 and B2, which means that both
companies should use television advertising. The payoff will be in favor of company A, because
its market share will increase by 5%. In this case, we say that the value of the game is 5%, and
that A and B are using a saddle-point solution.
The saddle-point solution precludes the selection of a better strategy by either company. If B
moves to another strategy (B1> B3 , or B4 ), Company A can stay with strategy A 2, which
ensures that B will lose a worse share of the market (6% or 8%). By the same token, A does not
want to use a different strategy because if A moves to strategy A 3, B can move to B3 and realize
a 9% increase in market share. A similar conclusion is realized if A moves to AI, as B can move
to B4 and realize a 3% increase in market share.

The optimal saddle-point solution of a game need not be a pure strategy. Instead, the solution
may require mixing two or more strategies randomly, as the following example illustrates.

Prepared by: Mr. R A Khan, Visiting Faculty Page 2

Two players, A and B, play the coin-tossing game. Each player, unbeknownst to the other,
chooses a head (H) or a tail (T). Both players would reveal their choices simultaneously. If they
match (HH or TT), player A receives $1 from B. Otherwise, A pays B $l.
The following payoff matrix for player A gives the row-min and the column-max values
corresponding to A's and B's strategies, respectively.
BH BT Row min
AH 1 -1 -1
AT -1 1 -1
Col max 1 1
The maximin and the minimax values of the games are - $1 and $1, respectively. Because the
two values are not equal, the game does not have a pure strategy solution. In particular, if AH is
used by player A, player B will select BT to receive $1 from A. If this happens, A can move to
strategy AT to reverse the outcome of the game by receiving $1 from B. The constant temptation
to switch to another strategy shows that a pure strategy solution is not acceptable.
Instead, both players can randomly mix their respective pure strategies. In this case, the optimal
value of the game will occur somewhere between the maximin and the minimax values of the
game-that is,
maximin (lower) value value of the game minimax (upper) value
Thus, in the coin-tossing example, the value of the game must lie between -$1 and +$1.

Examples
Solve the payoff matrix
1.
Player B
B1 B2 B3
Player A A1 2 4 5
A2 10 7 9
A3 4 5 6
Solution

Prepared by: Mr. R A Khan, Visiting Faculty Page 3

Strategy of player A – A2
Strategy of player B – B2
Value of the game = 7
2.
Player B
I II III IV V
I -2 0 0 5 3
Player A II 3 2 1 2 2
III -4 -3 0 -2 6
IV 5 3 -4 2 -6

Solution

Prepared by: Mr. R A Khan, Visiting Faculty Page 4

Strategy of player A – II
Strategy of player B - III
Value of the game = 1
3..
B1 B2 B3 B4
A1 1 7 3 4
A2 5 6 4 5
A3 7 2 0 3

Solution

Strategy of player A – A2
Strategy of player B – B3
Value of the game = 4
4.
B’s Strategy
B1 B2 B3 B4 B5
A1 8 10 -3 -8 -12
A’s A2 3 6 0 6 12
Strategy A3 7 5 -2 -8 17
A4 -11 12 -10 10 20
A5 -7 0 0 6 2
Solution

Prepared by: Mr. R A Khan, Visiting Faculty Page 5

Strategy of player A – A2
Strategy of player B – B3
Value of the game = 0
5.

Solution

Value of the game = 4

Prepared by: Mr. R A Khan, Visiting Faculty Page 6

Exercise
1. Explain the concept of game theory.
2. What is a rectangular game?
3. What is a saddle point?
4. Define pure and mixed strategy in a game.
5. What are the characteristics of game theory?
6. Explain two-person zero-sum game giving suitable examples.
7. What are the limitations of game theory?
8. Explain the following terms
a. Competitive Game
b. Strategy
c. Value of the game
d. Pay-off-matrix
e. Optimal strategy
9. Explain Maximin and Minimax used in game theory
10. For the game with payoff matrix

Determine the best strategies for player A and B and also the value of the game.

Prepared by: Mr. R A Khan, Visiting Faculty Page 7