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Game Theory

Types of Games

  1. Two-Person and N-Person Games: In two-person games, there are only two players, though each may have many possible choices. If more than two people are involved, it is called an n-person game.
  2. Zero-Sum Game: A zero-sum game is one where the total gains and losses of all players equal zero, regardless of the outcome. The points gained by winners are offset by the points lost by losers.
  3. Two-Person Zero-Sum Game: This type involves two players where the gain of one equals the loss of the other. It is often represented by a rectangular pay-off matrix.

Strategy

The term Strategy refers to a complete plan of action, specifying what a player will do in any future contingency during the game. Strategies can be classified as:
(i) Pure strategy (ii) Mixed strategy

  1. Pure Strategy: A strategy is called pure if one knows in advance of the play that it is certain to be adopted, irrespective of the strategy the other players might choose.
  2. Mixed Strategy: The optimal strategy mixture for each player is determined by assigning probabilities to each strategy. This is called a mixed strategy because it is a probabilistic combination of available choices. Mixed strategies are denoted by a set:
    S = {x1, x2, ..., xn}, where x is the probability of choosing a course of action.
    So, x1 + x2 + ... + xn = 1.
    Note: A pure strategy is a special case of a mixed strategy.

Pay-Off

Pay-off is the outcome of playing the game. A pay-off matrix is a table showing the amount received by the player after all possible plays of the game. The payment is made by the player listed at the top of the table.
If Player A has m courses of action and Player B has n courses, the pay-off matrix is constructed as follows:

  1. Row designations represent Player A's courses of action.
  2. Column designations represent Player B's courses of action.
  3. In a two-person zero-sum game, the entries in Player B's pay-off matrix will be the negatives of the corresponding entries in Player A's pay-off matrix. For example:

    Player A's Pay-Off Matrix: \[ \begin{pmatrix} & 1 & 2 & 3 & \cdots & n \\ 1 & a_{11} & a_{12} & a_{13} & \cdots & a_{1n} \\ 2 & a_{21} & a_{22} & a_{23} & \cdots & a_{2n} \\ 3 & a_{31} & a_{32} & a_{33} & \cdots & a_{3n} \\ \vdots & \vdots & \vdots & \vdots & \ddots & \vdots \\ m & a_{m1} & a_{m2} & a_{m3} & \cdots & a_{mn} \\ \end{pmatrix} \]

    Player B's Pay-Off Matrix (Negative of A's): \[ \begin{pmatrix} & 1 & 2 & 3 & \cdots & n \\ 1 & -a_{11} & -a_{12} & -a_{13} & \cdots & -a_{1n} \\ 2 & -a_{21} & -a_{22} & -a_{23} & \cdots & -a_{2n} \\ 3 & -a_{31} & -a_{32} & -a_{33} & \cdots & -a_{3n} \\ \vdots & \vdots & \vdots & \vdots & \ddots & \vdots \\ m & -a_{m1} & -a_{m2} & -a_{m3} & \cdots & -a_{mn} \\ \end{pmatrix} \]

The Maximin - Minimax Principle

Q1: Solve the game whose pay-off matrix is given below:

                
                          Player B
                   B1   B2   B3   B4   B5 
    -----------------------------------------
             A1 |  -2    0    0    5    3 |
Player A     A2 |   3    2    1    2    2 |
             A3 |  -4   -3    0   -2    6 |
             A4 |   5    3   -4    2   -6 |
    -----------------------------------------
                
            

Let’s solve this step by step:

Step 1: First, we look at the row minima. These values tell us the worst outcome for Player A if they pick each row. Player A wants to make sure they get the best possible payoff, even in the worst case. So, they will choose the row with the highest row minimum.

  • Row Minima:
    • Row A1: -2
    • Row A2: 1
    • Row A3: -4
    • Row A4: -6
  • Max(Row Minima) = Max(-2, 1, -4, -6) = 1

Step 2: Next, we look at the column maxima. These values tell us the best outcome for Player B if they pick each column. Player B wants to limit Player A's gain as much as possible, so they will choose the column with the lowest column maximum.

  • Column Maxima:
    • Column B1: 5
    • Column B2: 3
    • Column B3: 1
    • Column B4: 5
    • Column B5: 6
  • Min(Column Maxima) = Min(5, 3, 1, 5, 6) = 1
                                          Player B
                   B1   B2   B3   B4   B5 | Row Minima
    -----------------------------------------------
             A1 |  -2    0    0    5    3 |   -2
Player A     A2 |   3    2    1    2    2 |    1
             A3 |  -4   -3    0   -2    6 |   -4
             A4 |   5    3   -4    2   -6 |   -6
    -----------------------------------------------
  Column Maxima     5    3    1    5    6
                
            

Step 3: Compare the results:

  • Max(Row Minima) = 1
  • Min(Column Maxima) = 1

Since these two values are equal, there is a saddle point in this game.

Value of the game = 1

The position of the saddle point tells us the optimal strategy for both players. It is:

  • Optimal Strategy: (A2, B3)

In simple terms:

Player A wants to play it safe and go for the highest guaranteed payoff. To do this, they look at the smallest numbers in each row (called the row minima) and pick the best of those. On the other hand, Player B wants to keep Player A’s payoff as low as possible. So, they focus on the largest numbers in each column (called the column maxima) to try to limit Player A’s gain.
If the number Player A picks (from the row minima) matches the number Player B picks (from the column maxima), it’s called a saddle point. At this point, the game is solved!

Q2: Determine which of the following two-person zero-sum games are strictly determinable and fair. Provide the optimum strategy for each player in the case of strictly determinable games.

    
(i)
                  Player B
                   B1   B2   
                -         -
             A1 |  -5    2 |   
Player A     A2 |  -7   -4 |   
                 -        -

(ii)
                  Player B
                  B1   B2   
                -        -
             A1 |  1    1 |   
Player A     A2 |  4   -3 |   
                 -       -
    
  • For (i):
                
    (i)
                      Player B
                       B1   B2   
                    -         -  Row Minima
                 A1 |  -5    2 |   -5
    Player A     A2 |  -7   -4 |   -7
                     -        -
        Column Maxima  -5    2
                
            

    Step 1: Find the Row Minima and Column Maxima:

    • Row Minima:
      • Row A1: Min(-5, 2) = -5
      • Row A2: Min(-7, -4) = -7
    • Max(Row Minima) = Max(-5, -7) = -5
    • Column Maxima:
      • Column B1: Max(-5, -7) = -5
      • Column B2: Max(2, -4) = 2
    • Min(Column Maxima) = Min(-5, 2) = -5

    Step 2: Compare Max(Row Minima) and Min(Column Maxima):

    Since Max(Row Minima) = Min(Column Maxima) = -5, the game is strictly determinable.

    Step 3: Value of the game and optimal strategy:

    • Value of the game = -5
    • Optimal strategy: (A1, B1) — Player A chooses A1, and Player B chooses B1.
  • For (ii):
                
    (ii)
                      Player B
                      B1   B2   
                    -        -  Row Minima
                 A1 |   1    1 |    1
    Player A     A2 |   4   -3 |   -3
                     -        -
        Column Maxima   4    1
                
            

    Step 1: Find the Row Minima and Column Maxima:

    • Row Minima:
      • Row A1: Min(1, 1) = 1
      • Row A2: Min(4, -3) = -3
    • Max(Row Minima) = Max(1, -3) = 1
    • Column Maxima:
      • Column B1: Max(1, 4) = 4
      • Column B2: Max(1, -3) = 1
    • Min(Column Maxima) = Min(4, 1) = 1

    Step 2: Compare Max(Row Minima) and Min(Column Maxima):

    Since Max(Row Minima) = 1 and Min(Column Maxima) = 1, the game is strictly determinable.

    Step 3: Value of the game and optimal strategy:

    • Value of the game = 1
    • Optimal strategy: (A1, B1) — Player A chooses A1, and Player B chooses B1.

Summary:

  • Game (i) is strictly determinable with a value of -5 and an optimal strategy of (A1, B1).
  • Game (ii) is strictly determinable with a value of 1 and an optimal strategy of (A1, B1).

Games Without Saddle Points (Mixed Strategy)

In some two-person zero-sum games, a saddle point does not exist. This happens when the max of the row minima is not equal to the min of the column maxima. Such games are solved using mixed strategies, where players assign probabilities to their strategies instead of selecting a single pure strategy.

Various methods are available to solve games without a saddle point, depending on the size and structure of the payoff matrix:

2x2 Games Without Saddle Point

Consider a 2x2 two-person zero-sum game without any saddle point, having the pay-ff matrix for player A as:

                        
                  Player B
                  B1    B2   
                -          -
             A1 | a11   a12 |   
Player A     A2 | a21   a22 |   
                 -         -
                        
                    
The optimum mixed strategies,
                        
            -         -
        A1 |  A1    A2 |   
S A  =  A2 |  p1    p2 |   
            -         -

            -         -
        A1 |  B1    B2 |   
S B  =  A2 |  q1    q2 |   
            -         -
                        
                    

where, \( p_1 = \frac{a_{22} - a_{21}}{(a_{11} + a_{22}) - (a_{12} + a_{21})} \)

p1 + p2 = 1 → p2 = 1 - p1

\( q_1 = \frac{a_{22} - a_{12}}{(a_{11} + a_{22}) - (a_{12} + a_{21})} \)

q1 + q2 = 1 → q2 = 1 - q1

The value of the game :

\( r = \frac{a_{11}a_{22} - a_{12}a_{21}}{(a_{11} + a_{22}) - (a_{12} + a_{21})} \)

Q: Solve the following pay-off matrix. Also determine the optimal strategies and value of the game.

                        
                Player B 
              -       -
             |  5    1 |   
Player A     |  3    4 |   
              -       -
                        
                    

Solution:

  •                                 
                -         -
            A1 |  A1    A2 |   
    S A  =  A2 |  p1    p2 |   
                -         -
    
                -         -
            A1 |  B1    B2 |   
    S B  =  A2 |  q1    q2 |   
                -         -
                                    
                                
    p1 = (4 - 3) / ((5 + 4) - (1 + 3)) = 1/5
    p2 = 1 - p1 = 4/5
    q1 = (4 - 1) / ((5 + 4) - (1 + 3)) = 3 /5
    q2 = 1 - 3/5 = 2/5
  • Value of the game = 17/5
  • ∴ Optimum mixed strategy = SA = (1/5, 4/5) and SB = (3/5, 2/5)

Dominance Property

The principle of dominance is a simple way to simplify a game matrix. It says that if one strategy is clearly better than another in all situations, we can ignore the weaker strategy. This helps reduce the size of the payoff matrix without affecting the optimal solution.

Let’s break it down:

  • A strategy dominates another strategy if it is better (or at least not worse) in every possible condition.
    • For example, if you’re comparing two rows (strategies for Player A) and one row always has better payoffs than the other, you can ignore the weaker row.
    • Similarly, for columns (strategies for Player B), if one column always gives worse payoffs than another, you can ignore it.
  • How does this help?

    By applying the dominance property, we can shrink the payoff matrix. This makes solving the game easier without changing the final result.

The Rules of Dominance:

  1. Row Dominance:

    Compare two rows. If one row (e.g., Row k) has values that are greater than or equal to the corresponding values in another row (e.g., Row r), then Row k is dominated by Row r. The dominated row (k) can be removed since it will never lead to a better outcome.

    Key takeaway: Remove the row with the minimum values because it offers less favorable outcomes.

  2. Column Dominance:

    Compare two columns. If one column (e.g., Column k) has values that are less than or equal to the corresponding values in another column (e.g., Column r), then Column k is dominated by Column r. The dominated column (k) can be removed as it always gives worse payoffs.

    Key takeaway: Remove the column with the maximum values because it represents less favorable strategies.

  3. Reducing the Payoff Matrix:

    We can delete dominated rows and columns to make the matrix smaller. This makes calculations easier without affecting the optimal strategies.

  4. Combination Dominance:

    Sometimes, a linear combination of rows or columns can dominate another row or column. In that case, the dominated row or column can still be removed. This is less common but follows the same idea.

In simple terms:

The dominance property helps us focus only on the important strategies by removing weaker ones. It’s like cleaning up unnecessary options in a game to make solving it faster and simpler!

Q: Solve the following game:


           Player B 
          -            -
         |  1    7    2 |   
Player A |  6    2    7 | 
         |  5    1    6 |    
          -            -

Solution:

  • Step 1: Check for a Saddle Point:

    A saddle point exists if the max of the row minima equals the min of the column maxima. Let’s calculate these:

    • Row Minima:
      • Row 1: Min(1, 7, 2) = 1
      • Row 2: Min(6, 2, 7) = 2
      • Row 3: Min(5, 1, 6) = 1
      Max(Row Minima) = 2
    • Column Maxima:
      • Column 1: Max(1, 6, 5) = 6
      • Column 2: Max(7, 2, 1) = 7
      • Column 3: Max(2, 7, 6) = 7
      Min(Column Maxima) = 6

    Since Max(Row Minima) ≠ Min(Column Maxima), there is no saddle point. We proceed using the dominance property to simplify the matrix.

  • Step 2: Apply Dominance Property:

    We simplify the matrix by identifying dominated rows or columns and removing them:

    1. Compare Columns:

      Let’s compare the columns pairwise:

      • Column 1 vs Column 3:

        Column 1: (1, 6, 5) | Column 3: (2, 7, 6)

        All values in Column 3 are greater than or equal to the corresponding values in Column 1. This means Column 3 is dominating Column 1. We remove Column 3.

      Updated matrix after removing Column 3:

      
                Player B 
                -       -
               |  1    7 |   
      Player A |  6    2 | 
               |  5    1 |    
                -       -
      
                          
  • Step 3: Eliminate Dominated Rows:

    Now, we compare the rows in the updated matrix:

    
             Player B 
              -       -
             |  1    7 |   
    Player A |  6    2 | 
             |  5    1 |    
              -       -
    
                
    • Compare Row 1 and Row 3:

      Row 1: (1, 7) | Row 3: (5, 1)

      All values in Row 1 are less than or equal to the corresponding values in Row 3. This means Row 3 is dominated by Row 1, and we can remove Row 3.

    Updated matrix after removing Row 3:

    
               Player B 
              -       -
             |  1    7 |   
    Player A |  6    2 |    
              -       -
    
                
  • Step 4: Solving the 2x2 Game Matrix:

    Now that we have a 2x2 matrix, we can apply the dominance property again or use a different method to find the optimal strategies. In this case, we will:

    • Row Player’s Optimal Strategy: Player A will choose Row 1 because it gives the highest payoff in both columns.
    • Column Player’s Optimal Strategy: Player B will choose Column 2, as it gives the highest payoff for Player B when Player A chooses Row 1.

    Thus, the optimal solution occurs at the cell (Row 1, Column 2), which has a payoff of 7 for Player A and 7 for Player B.

Reference