Operations Research-

Game Theory

Presentation By: Dr. Chanchala Jain

 Games Theory
This theory is helpful when 2 or more individuals
or organizations with conflicting objectives try to
make decisions. In such situations, a decision
made by one decision-maker affects the decision
made by one or more of the remaining decision
makers and the final outcome depends upon the
decision of all the parties. Such situations often
arise in the fields of business, industry,
economics, sociology and military training.
 Games Theory
The theory of games is based on the minimax
principle put forward by J. Von Neumann which
implies that each competitor will act so as to
minimize his maximum loss (or maximize his
minimum gain) or achieve best of the worst.
This theory does not describe how a game should
be played; it describes only the procedure and
principles by which plays should be selected.
 Characteristics of Games
• There are finite number of participants or competitors. If
the no. of participants is 2, the game is called two-person
game, for no. greater than two, it is called n-person game.
• Each participant has available to him a list of finite number
of possible courses of action. The list may not be same for
each participant.
• Each participant knows all the possible choices available to
others but does not know which of them is going to be
chosen by them.
• A play is said to occur when each of the participants
chooses one of the courses of action available to him. The
choices are assumed to be made simultaneously so that no
participant knows the choices made by others until he has
decided his own.
 Characteristics of Games
• Every combination of courses of action determines an
outcome which results in gains to the participants. The
gain may be positive, negative or zero. Negative gain is
called a loss.
• The gain of a participant depends not only on his own
actions but also those of others.
• The gains (payoffs) for each and every play are fixed and
specified in advance and are known to each player. Thus,
each player knows fully the information contained in the
payoff matrix.
• The players make individual decisions without direct
communication.
 Definitions
• Game: It is an activity between two or more persons,
involving actions by each one of them according to a set of
rules, which results in some gain (+ve, -ve or zero) for
each. If in a game the actions are determined by skills, it is
called a game of strategy, if they are determined by
chance, it is termed as a game of chance. Further a game
may be finite or infinite. A finite game has a finite number
of moves and choices, while an infinite game contains an
infinite number of them.
• Player: Each participant or competitor playing a game is
called a player. Each player is equally intelligent and
rational in approach.
• Play: A play of the game is said to occur when each player
chooses one of his course of action.
 Definitions
• Strategy: It is the predetermined rule by which a player
decides his course of action from his list of courses of
actions during the game. To decide a particular strategy, the
player need not know the others strategy.
• Pure Strategy: It is the decision rule to always select a
particular course of action. It is usually represented by a
number with which the course of action is associated.
• Mixed Strategy: It is decision, in advance of all plays, to
choose a course of action for each play in accordance with
some probability distribution. Thus, a mixed strategy is a
selection among pure strategies with some fixed
probabilities (proportions). The advantage of a mixed
strategy, after the pattern of the game has become evident,
is that the opponents are kept guessing as to which course
of action will be adopted by a player.
 Definitions
• Optimal Strategy: The strategy that puts the player in
the most preferred position irrespective of the
strategy of his opponents is called an optional
strategy. Any deviation from this strategy would
reduce his payoff.
• Zero-sum game: It is a game in which the sum of
payments to all the players, after the play of the
game, is zero. In such a game, the gain of players that
win is exactly equal to the loss of players that lose,
e.g., two candidates fighting elections, wherein the
gain of votes by one is the loss of votes to the other.
 Definitions
• Two-person-zero-sum game: It is a game involving only two
players, in which the gain of one player equals the loss to
the other. It is also called a rectangular game or matrix
game because the payoff matrix is rectangular in form. If
there are n players and the sum of the game is zero, it is
called n-person zero-sum game. The characteristics of a
two-person zero-sum game are:
a. Only two players are involved,
b. Each player has a finite number of strategies to use,
c. Each specific strategy results in a payoff,
d. Total payoff to the two players at the end of each play in
zero.
 Definitions
• Nonzero-sum game: Here a third party (e.g. the ‘house or a
‘kitty’) receives or makes some payment. A payoff matrix
for such a game is shown below. The left-hand entry in each
cell is the payoff to A,
Table
Player A
2, 2 - 6, 6

6, -6 -2, -2
Player B

and the right-hand entry is the payoff to B. Note that for play
combinations (1, 1) and (2, 2) the sums of the payoffs are not
equal to zero.
 Definitions
• Payoff: It is the outcome of the game. Payoff (gain or loss)
matrix is the table showing the amounts received by the
player named at the left-hand side after all possible plays of
the game. The payment is made by player named at the top
of the table.
Let player A have m courses of action and player B have n
courses of action. Then the game can be described by a pair of
matrices which can be constructed as described below:
a. Row designations for each matrix are the courses of
action available to player A.
b. Column designations for each matrix are the courses of
action available to player B.
c. The cell entries are the payments to A for one matrix
and to B for the other matrix. The cell entry aij is the
 Definitions
payments to A in A’s payoff matrix when A chooses
the course of action i and B chooses the course of
action j.
d. In a two-person zero-sum game, the cell entries in
B’s payoff matrix will be the negative of the
corresponding cell entries in A’s payoff matrix. A is
called maximizing player as he would try to
maximize the gains, while B is called minimizing
player as he would try to minimize his losses.
 Player B
1 2 3 … j… n

1 a11 a12 a13 … a1j… a1n

2 a21 a22 a23 … a2j… a2n
3 a31 a32 a33 … a3j... a3n
. . . . . . .
. . . . . . .
Player A . . . . . . .
i ai1 ai2 ai3 … aij… ain
. . . . . . .
. . . . . . .
. . . . . . .
m am1 am2 am3 … amj… amn

A’s payoff matrix

 Player B
1 2 3 … j… n
1 -a11 -a12 -a13 … -a1j… -a1n
2 -a21 -a22 -a23 … -a2j… -a2n
3 -a31 -a32 -a33 … -a3j... -a3n
. . . . . . .
. . . . . . .
Player A . . . . . . .
i -ai1 -ai2 -ai3 … -aij… -ain
. . . . . . .
. . . . . . .
. . . . . . .
m -am1 -am2 -am3 … -amj… -amn
B’s payoff matrix
Thus, the sum of payoff matrices for A and B is a null matrix.
Here, the objective is to determine the optimum strategies of
both the players that result in optimum payoff to each.
Irrespective of the strategy used by the other.
Henceforth, we shall usually omit B’s payoff matrix, keeping in
mind that it is just the negative of A’s payoff matrix.
 Saddle Point
The saddle point is the point of intersection of
the two courses of action and the gain at this
point is the value of the game.
The game is said to be fair if
maximin value = minimax value = 0,
and is said to be strictly determinable if
maximin value = minimax value ≠ 0.
Saddle point is the number which is lowest in
its row and highest in its column.
 Pure Strategy (Saddle Point)
Example 1: In a certain game, player A has possible choices
L, M and N, while player B has two possible choices P and Q.
Payments are to be made according to the choices made.
Choices Payment
L, P A pays B Rs. 3
L, Q B pays A Rs. 3
M, P A pays B Rs. 2
M, Q B pays A Rs. 4
N, P B pays A Rs. 2
N, Q B pays A Rs. 3
What are the best strategies for player A and B in this game?
What is the value of the game for A and B?
 Solution: These payments can be arranged in the matrix
form. Let positive number represent a payment from B to A
and negative number a payment from A to B. We, then,
have the payoff matrix shown in following table:
Player B
P Q Minimum of row
-3 3 -3 Minimum gain
L guaranteed to A if
-2 4 -2 he plays his pure
Player A M strategy

2 3 2
N
(2) maximin
A selects strategy
Maximum of column 2 4 that maximizes his
minimum gain
Maximum loss to B (2) minimax B selects strategy
if he plays his pure that minimizes his
strategy maximum loss

Minimax = Maximin = 2 = Value of Game

Strategies for A = N
Strategies for B = P
Example 2: Consider the game G with the following payoff:
Player B
B1 B2 B3
4 6 4
A1
Player A
A2 2 10 0

Determine the value of game.

 Solution:
Player B
B1 B2 B3 Minimum of row

4 6 4 4
A1
Player A
A2 2 10 0 0

Maximum of column 4 10 4 (4) maximin

(4) minimax

Minimax = Maximin = 4 = Value of Game

Strategies for A = A1
Strategies for B = B1 Or B3
 Dominance Rule
If no pure strategies exist, the next step is to eliminate
certain strategies (rows and/or columns) by dominance.
Rows and/or columns of the payoff matrix that are inferior
to at least one of the remaining rows and/or columns are
deleted from further consideration. The resulting game can
be solved for some mixed strategy.
The dominance rule for columns is: Every value in the
dominating column(s) must be less than or equal to the
corresponding value of the dominated column. Delete the
dominated column.
The dominance rule for rows is: Every value in the
dominating row(s) must be greater than or equal to the
corresponding value of the dominated row. Delete the
dominating row.
Example 3: Solve the game by dominance rule and
find the optimum strategies for P and Q and the
value of the game.
Colour chosen by Q
T U V W
1 7 1 4
X
-2 5 2 6
Colour chosen by P Y

Z 3 6 3 5
 Solution: Solving the given problem by dominance rule.
Applying column dominance, dominated column, i.e., U or 2nd
column will be deleted as it is dominating to column ‘T’.
Dominating
T U V W
1 < 7 2 4
X
-2 < 5 4 6
Y

Z 3 < 6 3 5

Resultant Matrix T V W
X 1 2 4

Y -2 4 6

Z 3 3 5
Resultant Matrix T V W
Now in this matrix applying
X 1 <2 4 column dominance,
dominated column, i.e., V
Y -2 <4 6 or 2nd column will be
deleted as it is dominating
Z 3 =3 5 ‘T’ column.

Reduced Matrix T W
1 4 Now in this matrix applying
X
> < row dominance,
-2 dominating row, i.e., X
Y < <6
or 1st row will be deleted
3 5 as it is dominated by ‘Z’
Z
row.
Resultant Matrix
T W Minimum of row
Y -2 6 -2

Z 3 5 3
Maximum of column 3 6 (3) maximin

(3) minimax

Obtained matrix is 2x2 matrix, so to solve this game saddle

point method can be adopted.

Minimax = Maximin = 3 = Value of Game

Strategies for Player P = Z
Strategies for Player Q = T
 Alternate Solution
Resultant Matrix T V W
Now in this matrix
X 1 2 4 applying row
> < < dominance, dominating
Y -2< 4< 6< row will be deleted.

Z 3 3 5

Reduced Matrix T V W
-2 <4 6 Now in this matrix applying
Y
column dominance,
3 =3 5 dominated column, i.e., V
Z
or 2nd column will be
deleted.
 Alternate Solution

Reduced Matrix T W Minimum of row

Y -2 6 -2

Z 3 5 3
Maximum of column 3 6 (3) maximin

(3) minimax

Minimax = Maximin = 3 = Value of Game

Strategies for Player P = Z

Strategies for Player Q = T
 Alternate Solution
Resultant Matrix T V W
Now in this matrix
X 1 2 4 applying row
> < < dominance, dominating
Y -2< 4< 6< row will be deleted.

Z 3 3 5

Reduced Matrix T V W
-2 <4 6 Now in this matrix applying
Y
column dominance,
3 =3 5 dominated column, i.e., V
Z
or 2nd column will be
deleted.
Example 4: Solve the following game by dominance rule:

B1 B2 B3 B4

A1 6 8 3 13

A2 4 1 5 3

A3 8 10 4 12

A4 3 6 7 12
Solution:
Colour chosen by Q
Minimum of row
B1 B2 B3 B4

A1 6 8 3 13
3

A2 4 1 5 3 1
Colour chosen by P

A3 8 10 4 12 4

A4 3 6 7 12 3

Maximum of column 8 10 7 13 (4) maximin

(7) minimax

Minimax ≠ Maximin
This means saddle point does not exist. Therefore, need to
solve above game by other method.
Solution: Now, solving the given problem by dominance rule.
Applying column dominance, dominated column, i.e., B4
column will be deleted as it is dominated to column B2.

Dominating
B1 B2 B3 B4

A1 6 8 3 13

A2 4 1 5 3

A3 8 10 4 12

A4 3 6 7 12
Resultant Matrix
B1 B2 B3 Now in this matrix
applying row dominance,
A1 6 8 3 dominating row, i.e., A1
or 1st row will be deleted

Dominatin
A2 4 1 5 as ‘A3’ row is dominating

g
it.
A3 8 10 4

A4 3 6 7

Now in this matrix

Resultant Matrix B1 B2 B3 applying row dominance,
4 1 5 dominating row, i.e., A2
Now in this matrix A2 or 1st row will be deleted

Dominating
compare columns and as it is dominated by
8 10 4
rows as per dominance A3 average of ‘A3 and A4’
rule to reduce its size rows
3 6 7
A4 (8+3)/2 (10+6)/2 (4+7)/2
5.5 8 5.5
 So now following will be the resultant matrix:
Now in this matrix
Dominating
B1 B2 B3 applying column
dominance, dominated
8 10 4 column, i.e., B2
A3
or 2nd column will be
3 6 7 deleted as it is
A4 dominating ‘B1’ column.
Reduced matrix:
B1 B3 Minimum of row
8 4 4
A3

3 7 3
A4
(4) maximin
Maximum of column 8 7
(7) minimax
 Mixed Strategy (2 X 2 Games)

Arithmetic and algebraic methods are used

for finding optimum strategies as well as
game value for a 2x2 game.
 Arithmetic method (odds Method or Short cut
Method) for finding optimum strategies and value
of game
It provides an easy method for finding the optimum strategies
for each player in a 2 x 2 game without a saddle point. It
consists of the following steps:
• Subtract the two digits in column 1 and write the
difference under column 2, ignoring the sign.
• Subtract the two digits in column 2 and write the
difference under column 1, ignoring the sign.
• similarly proceed for the two rows.
These values are called oddments. They are the frequencies
with which the players, must use their courses of action in
their optimum strategies.
 Player B
B1 B2
a11 a12 O1 = a21 – a22
A1
Player A
A2 a21 a22 O2 = a11 – a12

O3 O4
= a12 – a22 = a11 – a21
A’s Optimal Strategies B’s Optimal Strategies
O1 O2 O3 O4
A1 = A2 = B1 = B2 =
O1 + O 2 O1 + O 2 O3 + O 4 O3 + O 4

Value of Game

a11 a22 - a12 a21 a11 O1 + a21 O2 a12 O1 + a22 O2

V= V= V=
(a11 + a22)- (a12 + a21) O1 + O 2 O1 + O 2

a11 O3 + a12 O4 a21 O1 + a22 O2

V= V=
O3 + O 4 O3 + O 4
Two-person zero-sum game without saddle
point

Example: In a game of matching coins, player A

wins Rs. 2 if there are two heads, wins nothing
if there are two tails and loses Rs. 1 when there
are one head and one tail. Determine the payoff
matrix, best strategies for each player and the
value of game to A.
Solution: Player B
H T Minimum of row
2 -1 -1
H
Player A -1
-1 0
T
(-1) maximin
Maximum of column 2 0
(0) minimax

Minimax ≠ Maximin

Since there is no saddle point, the optimal strategies will be

mixed strategies. Therefore, need to solve above game by
other method. The order of matrix is 2x2, hence applying
arithmetic method to find the best strategies for both the
players and value of game.
 Player B
H T
2 -1 1/(1 + 3) = 0.25
H 1
Player A
-1 0 3
T 3/(1 + 3) = 0.75

1 3
0.25 0.75

Optimal Strategy for player A: (1/4, 3/4),

Optimal Strategy for player B: (1/4, 3/4)
To obtain the value of game any of the following expressions
may be used:
Using A’s Oddments
 H T

H 2 -1 1
T -1 0
3
Using A’s Oddments 1 3

2 * 1 + (– 1)* 3 1
B plays H; value of the game, V = Rs. = Rs. -
1+3 4

-1 * 1 + (0)* 3 1
B plays T; value of the game, V = Rs. = Rs. - 4
1+3

Using B’s Oddments

2*1–1*3 1
A plays H; value of the game, V = Rs. = Rs. -
3+1 4

-1 * 1 + 0 * 3 1
A plays T; value of the game, V = Rs. = Rs. -
3+1 4
 Mixed Strategy
(2 x n Games or M x 2 games)
These are the games in which one player has only two
courses of action open to him while his opponent may have
any number. To solve such games following steps are
performed:
• To look for a saddle point, if there is one, the game is
readily solved.
• If there is no saddle point, then need to reduce the given
matrix to 2x2 size by the rules of dominance.
• If 2x2 matrix obtained then apply arithmetic method or
other method to solve the game.
• If however, the given matrix cannot be reduced to 2x2
size, it can be still solved by algebraic method, method of
sub-games and graphical method.
 Graphical Method for 2xn or mx2
Games
Graphical method is applicable to only those
games in which one of the players has two
strategies only. It reduces the 2xn or mx2 game to
2x2 size by indentifying and eliminating the
dominated strategies and then solves it by the
analytical (algebraic or arithmetic) methods. The
resulting solution is also the solution to the original
problem.
Example: Solve the game given in table by the
graphical method:
B
y1 y2 y3 y4
19 6 7 5
x1

x2 7 3 14 6
A
x3 12 8 18 4

x4 8 7 13 -1
 Solution: Firstly, check the saddle point.
B
y1 y2 y3 y4 Minimum of row
19 6 7 5
x1 5

x2 7 3 14 6 3
A
x3 12 8 18 4 4

8 7 13 -1 -1
x4
(5) maximin
Maximum of column 19 8 18 6
(8) minimax

Minimax ≠ Maximin
There is no saddle point, so now will apply dominance rule to
reduce the size of matrix.
All the cell values in the column 2 as well as 4 are less than
the corresponding values in columns 1 and 3. hence columns
1 and 3 are dominated by columns 2 and 4.

Dominating B Dominating

y1 y2 y3 y4

x1 19 > 6 7 > 5

x2 7 > 3 14 > 6

A x3 12 > 8 18 > 4

x4 8 > 7 13 > -1
 B
Resultant Matrix y2 y4

x1 6 5

x2 3 6
A
x3 8 4
> >
x4 7 -1

Both the cell values for row 3 are higher than those for row 4.
hence, row 3 dominates row 4. B
y2 y4
Reduced Matrix
x1 6 5

x2 3 6
A
x3 8 4
Let A1, A2, A3 be the strategies which A mixes with
probabilities x1, x2 and x3 and B2, B4 be the strategies which B
mixes with probabilities y2 and y4 = 1 – y2. When B adopts
strategy B2, y2 = 1 and the probability with which he will
adopt strategy B4 i.e., y4 = 0.
This matrix can be solved by now graphical method. B’s
expected payoffs corresponding to A’s pure strategies are
given below:
A’s pure strategies B’s Expected payoffs y2 = 0 y2 = 1
A1 6y2 + 5(1 – y2) = y2 + 5 5 6
A2 3y2 + 6(1 – y2) = -3y2 + 6 6 3
A3 8y2 + 4(1 – y2) = 4y2 + 4 4 8
These three straight lines can be plotted as function of y2.
Draw 2 lines B4 and B2 parallel to each other one unit
apart and mark a scale on each of them. To
represent A’s strategy, join mark 6 on B2 with mark 5
on B4; to represent A’s second strategy, join mark 3
on B2 with mark 6 on B4; and so on and bound the
figure from above since B is a minimizing player.
Since player B wishes to minimize his maximum
expected losses, the two lines which intersect at the
lowest point of the upper bound (envelope) show
the two courses of action A should choose in his best
strategy i.e., A1 and A2. We can, thus, immediately
reduce the 3x2 game to 2x2 game which can be
easily solved by arithmetic method.
 B4 B2
Minimax
8 (8)

7 7

(6) (6)

(5) 5

(4) 6 5 4

3 3 6 (3)

2 2

0 0
y2 = 0 y2 = 1
 B
Y2 y4 Minimum of row
x1 6 5 5
A
x2 3 6 3
(5) maximin
Maximum of column 6 6
(6) minimax

Minimax ≠ Maximin
Arithmetic Method Optimal Strategies are
B
A = (3/4, 1/4, 0, 0)
Y2 y4
B = (0, 1/4, 0, 3/4)
x1 6 5 3 3/(1+3) = 3/4
A
x2 3 6 1 Value of the game, V
1/(1+3) = 1/4
1 3 6 * 1 + 5* 3 21
1/(1+3) = 1/4 3/(1+3) = 3/4 = = 4
1+3
 Example: Solve the following 2x5 game by
graphical method:
Player B
1 2 3 4 5
x1 -5 5 0 -1 8
1
Player A
x2 = 1 – x 1 2 8 -4 -1 6 -5
 Solution: Solve the following 2x5 game by
graphical method:
Player B
Minimum of row
1 2 3 4 5
x1 -5 5 0 -1 8
1 -5
Player A -5
x2 = 1 – x 1 2 8 -4 -1 6 -5

(-5) maximin
Maximum of column 8 5 0 6 8

(0) minimax

Minimax ≠ Maximin

Saddle point does not exist. Also matrix cannot be reduced

by dominance rule.
 A’s expected payoffs corresponding to B’s pure strategies
are:

B’s pure strategies A’s Expected payoffs x1 = 0 x1 = 1

1 -5x1 + 8(1 – x1) = -13x1 + 8 8 -5
2 5x1 - 4(1 – x1) = 9x1 - 4 -4 5
3 0x1 - 1(1 – x1) = x1 - 1 -1 0
4 -1x1 + 6(1 – x1) = -7x1 + 6 6 -1
5 8x1 - 5(1 – x1) = 13x1 – 5 -5 8
 A2 8 8 A1
7 7

6 6

5 5
4 4
3 3

2 2
1 1
0 0

-1 -1
-2 -2
-3 -3
Maximin
-4 -4
-5 0
-5 -5
8 -1
x1 = 0 -6 -6 x1 = 1
 B
1 3 Minimum of row
1 -5 0 -5
A
2 8 -1 -1
(-1) maximin
Maximum of column 8 0
(0) minimax

Minimax ≠ Maximin
Arithmetic Method Optimal Strategies are
B
A = (9/14, 5/14)
1 3
B = (1/14, 0, 13/14, 0, 0)
1 -5 0 9 9/(9+5) = 9/14
A
2 8 -1 5 Value of the game, V
5/(9+5) = 5/14
1 13 -5 * 1 + 0* 13 5
1/(1+13) = 1/14 13/(1+13) = 13/14 = = - 14
(9 + 5)