Game Theory Draftj PDF
Game Theory Draftj PDF
Game Theory
by
.
Akshay Asok : Candidate code : 22019146002
Ajith.S : Candidate code : 22019146008
Firoz Muhammed : Candidate code : 22019146012
Harikrishne. B : Candidate code : 22019146014
Yedhukrishnan. D : Candidate code : 22019146019
DECLARATION
We hereby declare that the project report entitled Game Theory submitted
to the University of Kerala,in partial fulfilment of the requirement of the FDP
in Bachelor of Science (Mathematics) is a bonafide work carried out by one
of us and it has not been submitted earlier or elsewhere for similar purposes
according to the best of our knowledge and belief.
2. Ajith. S - 22019146008
4. Harikrishne. B - 22019146014
5. Yedhukrishnan. D - 22019146019
Ambalapuzha
25-03-2022
3
CERTIFICATE
This is to certify that the project entitled Game Theory submitted to the
University of Kerala,in partial fulfilment of the requirement of the FDP in
Bachelor of Science(Mathematics)by
2. Ajith. S - 22019146008
4. Harikrishne. B - 22019146014
5. Yedhukrishnan. D - 22019146019
is a bonafide work carried out by them under my supervision and it has not
been submitted earlier or elsewhere for similar purposes according to the best
of my knowledge and belief.
ACKNOWLEDGEMENT
We express our sincere thanks to our project supervisor Dr. Vishnu Nam-
boothiri. K,Associate Professor of Mathematics for motivating,directing and
advising us so that we could complete this project succesfully. We also thank
Sir Asokan C.K,Head of the Depmartment of Mathematics for his whole-
hearted support. We thank the Principal of our college and Librarian of the
college for providing all kind of infrastructural facilities.
2. Ajith. S - 22019146008
4. Harikrishne. B - 22019146014
5. Yedhukrishnan. D - 22019146019
Ambalapuzha
25-03-2022
Contents
1 Chapter 1 6
1.1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.2 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.3 History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.4 Classification of Game Theory . . . . . . . . . . . . . . . . . . 9
2 Chapter 2 10
2.1 Matrix multiplication and basic probability concept . . . . . . 10
2.2 Two person zero sum matrix game . . . . . . . . . . . . . . . 12
2.3 Fundamental theorem of Zero Sum Game . . . . . . . . . . . . 16
3 Chapter 3 19
3.1 Optimal strategies . . . . . . . . . . . . . . . . . . . . . . . . 19
4 Chapter 4 24
4.1 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5
Chapter 1
Chapter 1
1.1 Overview
Game Theoryis an approach to modelling behaviour in situations where the
outcome of your decisions depends on the decisions of others. Game theory
is the study of strategic, interactive decision making among rational individ-
uals or organizations. Game theory is a branch of applied mathematics that
provides tools for analyzing situations in which parties ( called players) make
decisions that are interdependent. This interdependence causes each player
to consider the other player’s possible decisions( or strategies) in formulating
strategy. In addition, a player need not be an individual; it may be a nation,
a corporation, or a team comprising many people with shared interests. A
solution to a game describes the optimal decisions of the players, who may
have similar, opposed, or mixed interests, and the outcomes that may re-
sult from these decisions. Game theory is applied for determining different
strategies in the business world. It offers valuable tools for solving strategy
problems.
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1.2. INTRODUCTION 7
1.2 Introduction
Game theory is a type of decision theory in which one’s choice of action
is determined after taking into account all possible alternatives available to
an opponent playing the same game, rather than just by the possibilities of
several outcome results. Game theory does not insist on how a game should
be played but tells the procedure and principles by which action should be
selected. Thus it is a decision theory useful in competitive situations. Game
is defined as an activity between two or more persons according to a set of
rules at the end of which each person receives some benefit or suffers loss.
The set of rules defines the game. Going through the set of rules once by the
participants defines a play.
8 CHAPTER 1. CHAPTER 1
1.3 History
The individual closely associated with the creation of the theory of games
is John von Neumann, one of the greatest mathematicians of this century.
Although others proceeded him in formulating a theory of games - notably
Emile Borel - it was von Neumann who published in 1928 the paper that
laid the foundation for the theory of two-person zero-sum games. The the-
ory of Games was born in 1944 with the publication of Theory of Games
and Economic Behaviour by Hungarian-born American mathematician John
von Neumann and his Princeton University colleague Oskar Morgenstern, a
German-born American economist. In their book, . They observed that eco-
nomics is much like a game, wherein players anticipate each other’s moves,
and therefore requires a new kind of mathematics, which they called game
theory. Their choice of title was a little unfortunate, since it quickly got
shortened to “Game Theory,” Nobel Laureate and a Father of Game Theory,
Lloyd S. Shapley(92), who shared the 2012 Nobel Memorial Prize in Eco-
nomic Science for work on game theory that has been used to study subjects
as diverse as matching couples and allocating costs.
1.4. CLASSIFICATION OF GAME THEORY 9
Chapter 2
10
2.1. MATRIX MULTIPLICATION AND BASIC PROBABILITY CONCEPT11
probability and sum over all possible payoffs, we obtain their ex-
pression
The wording in this definition suggests that optimal strategies are not
necessarily unique. This is indeed the case. However, it ean be proved that
any two sets or optimal strategies always result in the same value v of the
game. That is, if p*,q* and p**,q** are optimal strategies, then
The value of a game is thus the expected payoff to player R when both
choose any possible optimal strategies.
To find optimal strategies we must find vectors p* and q* that satisfy Equa-
tion 2.2 This is generally done by using linear programming techniques. Next,
we discuss special cases for which optimal strategies may be found by more
elementary techniques. now introduce the following definition.
A game whose payoff matrix has a saddle point is called strictly deter-
mined.
That is, an optimal strategy for player R is to always make the rth
move, and an optimal strategy for player C is to always make the
sth move. Such strategies for which only one move is possible are
called pure strategies. Strategies for which more than one move
is possible are called mixed strategies.To show that the above
pure strategies are optimal,the reader may verify the following
three equations:
for all strategies p and q.Because this is exactly Equation 2.2. It follows
that p* and q* are optimal strategies. From Equation 2.4 the value of a
strictly determined game is simply the numerical value of a saddle point
ars .It is possible for a payoff matrix to have several saddle points,but then
the uniqueness of the value of a game guarantees that the numerical values
of all saddle points are the same.
Chapter 3
Chapter 3
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20 CHAPTER 3. CHAPTER 3
Network C ’s Program
1 2 3 4
Network R’s Program 1 60 20 30 55
2 50 75 45 60
3 70 45 35 30
Solution
Subtract 50 from cach entry in 3.1 to construct the following
matrix:
10 −30 −20 5
0 25 −5 10
20 −5 −15 −20
This is the payoff matrix of the two-person zero-sum game in which each
network is considered to start with 50% of the audience, and the (i, j )-th
entry of the matrix is the percentage of the viewing audience that network
C loses to network R if programs i and j are paired against each other.It is
easy to see that the entry
a23 = −5
is a saddle point of the payoff matrix. Hence, the optimal strategy of network
R is to schedule program 2, and the optimal strategy of network C is to
schedule program 3. This will result in network R’s receiving 45% of the
audience and network C ’s receiving 55% of the audience.
2 × 2 matrix
Another case in which the optimal strategies can be found by elementary
means occurs when each player has only two possible moves. In this case,
the payoff matrix is a 2 x 2 matrix
a11 a12
A=
a21 a22
If the game is strictly determined, at least one of the four entries of A is
a saddle point, and the techniques discussed above can then be applied to
determine for optimal strategies the two players. If the game is not strictly
determined, we first compute payoff for arbitrary strategies p and q :
3.1. OPTIMAL STRATEGIES 21
a11 a12 q1
E(p, q) = pAq = p1 p2
a21 a22 q2
Because
p1 + p2 = 1 and q1 + q2 = 1 (3.2)
E(p, q) = [(a11 + a22 − a12 − a21 )p1 − (a22 − a21 )]q1 + (a12 − a22 )p1 + a22
(3.4)
and
a22 −a12
∗ a11 +a22 −a12 −a21
q = a11 −a21
a11 +a22 −a12 −a21
Strain
1 2
1 .85 .70
Vaccine
2 .60 .90
This matrix has no saddle points, so Theorem 2 is applicable.Consequently,
p∗1 = a11 +aa22−a 21
22 −a12 −a21
.90−.60
= .85+.90−.70−.60 = .30
.45
= 23
q1∗ = a11 +aa22−a 12
22 −a12 −a21
.90−.70
= .85+.90−.70−.60 = .20
.45
= 49
v = a11a11 a22 −a12 a21
+a22 −a12 −a21
= (.85)(.90)−(.70)(.60)
.85+.90−.70−.60
= .345
.45
= .7666 . . .
Thus the optimal strategy for the government is to inoculate 23 of the citizens
with vaccine 1 and 31 of the citizens with vaccine 2. This will guarantee that
about 76.7% of the citizens will be resistant to a virus attack regardless of the
distribution of the two strains.
In contrast, a virus distribution 94 of strain 1 and 59 of strain 2 will result
in the same 76.7% of resistant citizens, regardless of the inoculation strategy
adopted by the government.
Chapter 4
Chapter 4
4.1 Conclusion
Game theory is the study of mathematical models of strategic interactions
among rational agents.[1] It has applications in all fields of social science,
as well as in logic, systems science and computer science. Originally, it
addressed two-person zero-sum games, in which each participant’s gains or
losses are exactly balanced by those of other participants. In the 21st century,
game theory applies to a wide range of behavioral relations; it is now an
umbrella term for the science of logical decision making in humans, animals,
as well as computers.
24
Bibliography
[2] Howard Anton, Chris Rorres Elementary Linear Algebra and Applications
.9th Edition , John Wiley and Sons Canada,Limited, 2010.
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