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The following terminologies are commonly used in
Game theory:
 Player : Each participant (interested party) of a game
is called a player.
 Strategy : The strategy of a player is the
predetermined rule by which a player decides his
course of action from the list of courses of action
during the game. A strategy may be of two types:
a) Pure strategy - It is a decision, in advance of all
plays, always to choose a particular course of action.
b) Mixed strategy - It is a decision, in advance of all
plays, to choose a course of action for each play in
accordance with some particular probability
distribution.
 Optimal strategy : The course of action which
maximizes the profit of a player or minimizes
his loss is called an optimal strategy.
 Payoff : The outcome of playing a game is
called payoff.
 Payoff matrix : When the players select their
particular strategies, the payoffs (gains or
losses) can be represented in the form of a
matrix called the payoff matrix.
 Saddle point : A saddle point is an element of
the payoff matrix, which is both the smallest
element in its row and the largest element in
its column. Furthermore, the saddle point is
also regarded as an equilibrium point in the
theory of games.
 Value of the game : It refers to the expected
outcome per play when players follow their
optimal strategy.
A game with only two players is called a two-
person zero-sum game if the losses of one
player are equivalent to the gains of the other
so that the sum of their net gains is zero.
This game also known as rectangular game.
Player B
I II III IV V
I -2 0 0 5 3
Player A II 4 2 1 3 2
III -4 -3 0 -2 6
IV 5 3 -4 2 -6
Consider a two-person zero-sum game matrix which

represents payoff to the player A, Find the optimal
strategy, if any.
 We can sometimes reduce the size of a game’s pay off matrix by
eliminating a course of action which is so inferior to another as never
to be used. Such a course of action is said to be dominated by the
other. The concept of dominance is especially useful for the
evaluation of two-person zero-sum games where a saddle point does
not exist.
 General rule
1. If all the elements of a row, say kth, are less than or equal to the
corresponding elements of any other row, say rth, then kth row is
dominated by the rth row.
2. If all the elements of a column, say kth are greater than or equal to the
corresponding elements of any other column, say rth, then kth column
is dominated by rth column.
3. Omit dominated rows or columns.
4. If some linear combination of some rows dominates ith row, then ith row
will be deleted. Similar argument follows for columns.
 Reduce the size of the game for player’s A
and B in the following game.
B’s strategy
A’s I II III
strategy I 9 8 -7
II 3 -6 4
III 6 7 -7
 A mixed strategy game can be solved by
different solution methods such as
1.Algebraic method
2.Graphical method, and
3.Linear programming method.
 For any 22 two-person zero sum game
without any saddle point having the payoff
matrix for the player A
 Find the optimal strategies and worth for A
B’s strategy
A’s I II III
strategy I 9 8 -7
II 3 -6 4
III 6 7 -7
 Find the optimal strategies and worth for A
B’s strategy
A’s I II III
strategy I 12 -8 -2
II 6 7 3
III -10 -6 2
 A company is currently involved in negotiations with its union
on the upcoming wage contract. With the aid of an outside
mediator, the table below was constructed by the
management group. The pluses are to be interpreted as
proposed wage increases while minus figure indicates that a
wage reduction is proposed. The mediator informs the
management group that he has been in touch with the union
and that they have constructed a table that is comparable to
the table developed by the management. Both the company
and the union must decide on an overall strategy before
negotiations begin. The management group understands the
relationship of company strategies to union strategies in the
following table but lacks specific knowledge of game theory
to select the best strategy ( or strategies) for the firm. Assist
the management on this problem. What game value and
strategies are available to the opposing groups?
 Conditional costs to company (in lac Rs)
Company Union strategies

strategies U1 U2 U3 U4
C1 +0.25 +0.27 +0.35 -0.02
C2 +0.20 +0.16 +0.08 +0.08
C3 +0.14 +0.12 +0.15 +0.13
C4 +0.30 +0.14 +0.19 0.00
 Reduce the following two person zero sum game to
2x2 order and obtain the optimal strategies for
each player and value of the game
B1 B2 B3 B4
A1 3 2 4 0
A2 3 4 2 4
A3 4 2 4 0
A4 0 4 0 8
 Suppose that in a game of matching coins with
two players, one player wins Rs. 2 when there are
2 heads, and gets nothing when there are 2 tails
and looses Re 1 when there are one head and
one tail. Determine the best strategies for each
player and the value of the game.
 Player A and B play a game in which each has 3
coins a 5p, 10p and 20p. Each selects a coin
without the knowledge of the other’s choice. If
the sum of the coins is an odd amount, then A
wins B’s coin. But if the sum is even, then B wins
A’s coin. Find the best strategy for each player
and the value of the game.
Solve the following 2x5 game using the
graphical method.
Player B
Player B1 B2 B3 B4 B5
A A1 2 -1 5 -2 6
A2 -2 4 -3 1 0
Obtain the optimal strategies for both persons
and the value of the game for zero-sum two-
person game whose pay off matrix is as
follows:Player B
Player B1 B2
A A1 1 -3
A2 3 5
A3 -1 6
A4 4 1
A5 2 2
A6 -5 0
Use the notion of dominance to simplify the
rectangular game with the following pay off,
and solve it graphically.
Player B
Play B1 B2 B3 B4
er A1 18 4 6 4
A
A2 6 2 13 7
A3 11 5 17 3
A4 7 6 12 2

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The following terminologies are commonly used in

Consider a two-person zero-sum game matrix which

Company Union strategies

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