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 Game theory is a mathematical theory that deals with

the general features of competitive situations like
these in a formal, abstract way. It places particular
emphasis on the decision-making processes.
 Game theory is a decision theory in where ones
choice of action is determined after talking into
account all possible alternatives available to an
opponent playing in a same field.

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Player: Competitor(individual or group or
organization)
Strategy: Alternate course of action(choices)
Pure strategy: Using same strategy each time
(deterministic)
Mixed strategy: Using the course of action depending
on some fixed probability.
Optimum strategy: The choice that puts the player in
the most preferred position irrespective of his
competitors strategy.

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 Definition: Only 2 persons are involved in the game and the
gain made by one player is equal to the loss of the other.
 As the name implies, these games involve only two players
.They are called zero-sum games because one player wins
whatever the other one loses, so that the sum of their net
winnings is zero.
 In general, a two-person game is characterized by
◦ The strategies of player 1.
◦ The strategies of player 2.
◦ The pay-off table.

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 Terms used
◦ Pay off matrix: The representation of gains and losses resulting
from different actions of the competitors is represented in the
form of a matrix.
◦ Value of game: It is the expected outcome of the player when
all the players of the game follow their optimum strategy.
◦ Fair game: Value of the game is zero.

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Formulation of Two person zero – sum game

B1 B2 ……… Bn
A1 a11 a12 ……… a1n
A2 a21 a22 …........ a2n
. .
. .
Am am1 am2 ………. amn
A1,A2,…..,Am are the strategies of player A
B1,B2,…...,Bn are the strategies of player B
aij is the payoff to player A (by B) when the
player A plays strategy Ai and B plays Bj (aij
is –ve means B got |aij| from A)

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Consider the game of the odds and evens. This game consists
of two players A,B, each player simultaneously showing
either of one finger or two fingers. If the number of fingers
matches, so that the total number for both players is even, then
the player taking evens (say A) wins Rs.1 from B (the player
taking odds). Else, if the number does not match, A pays Rs.1
to B. Thus the payoff matrix to player A is the following table:

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A game can be solved by using the following three methods,
based on the nature of the problem.
◦ Saddle point concept/Max-min and Min max principle
 Games without saddle point

◦ Dominance rule
◦ Graphical method.

A primary objective of game theory is the development of

rational criteria for selecting a strategy. Two key assumptions are
made:
Both players are rational
Both players choose their strategies solely to promote their own welfare

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Max–Min(Maximin) : A row(winning) player will select the
maximum out of the minimum gains.

Min- Max(Minimax) : A column(loosing) player will always try

to minimize his maximum losses.

Saddle point: If max-min = min-max , then the game has a

saddle point and is the intersection point of both the values.

Value: The saddle point is called the value of the game.

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 Example

B1 B2 B3 B4 Row min
A1 8 6 2 8 2
A2 8 9 4 (SP) 5 4
A3 7 5 3 5 3

Col 8 9 4 8 max min

Max
min max 7/20/2021 11
 The solution of the game is based on the principle of securing
the best of the worst for each player. If the player A plays
strategy 1, then whatever strategy B plays, A will get at least 2.
 Similarly, if A plays strategy 2, then whatever B plays, will get
at least 4. and if A plays strategy 3, then he will get at least 3
whatever B plays.
 Thus to maximize his minimum returns, he should play
strategy 2.

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 Now if B plays strategy 1, then whatever A plays,
he will lose a maximum of 8. Similarly for strategies
2,3,4. (These are the maximum of the respective
columns). Thus to minimize this maximum loss, B
should play strategy 3.
and 4 = max (row minima)
= min (column maxima)
is called the value of the game.
4 is called the saddle-point.

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Problem 1: Solve the game whose pay off
matrix is given by

Player B
B1 B2 B3
A1 1 3 1
Player A A2 0 -4 -3
A3 1 5 -1

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Solution: Given that the pay off matrix is
Player B Row
minimum
B1 B2 B3
A1 1 3 1 1
Player A A2 0 -4 -3 -4
A3 1 5 -1 -1

Column maximum 1 5 1

Maximin = {1, -1, -4} = 1

Minimax = {1, 5, 1} = 1
Here Maximin = Minimax = 1
∴ The saddle point exists & it is 1.
∴ The value of the game = saddle point = 1
∴ The optimum strategy is (A1, B1).
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Problem 2: Solve the game whose pay off
matrix is given by

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

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Solution: Given that the pay off matrix is
Player B Row
B1 B2 B3 B4 B5 minimum

A1 -2 0 0 5 3 -2
A2 3 2 1 2 2 1
Player A
A3 -4 -3 0 -2 6 -4
A4 5 3 -4 2 -6 -6

Column maximum 5 3 1 5 6

Maximin = {-2, 1, -4, -6} = 1

[

Minimax = {5, 3, 1, 5, 6} = 1
Here Maximin = Minimax = 1
∴ The saddle point exists & it is 1.
∴ The value of the game = saddle point = 1
∴ The optimum strategy is (A2, B3).
{The optimum strategy is SA = (0,1,0,0), SB=(0,0,1,0,0) }. 17
Problem 3: Solve the game whose pay off
matrix is given by

Player B
B1 B2 B3 B4
A1 -5 2 0 7
Player
A A2 5 6 4 8
A3 4 0 2 -3

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Solution: Given that the pay off matrix is
Player B Row
B1 B2 B3 B4 minimum

A1 -5 2 0 7 -5

Player A
A2 5 6 4 8 4
A3 4 0 2 -3 -3
Column
5 6 4 8
maximum

Maximin = {-5, 4, -3} = 4

Minimax = {5, 6, 4, 8} = 4
Here Maximin = Minimax = 4
∴ The saddle point exists & it is 4.
∴ The value of the game = saddle point = 4
∴ The optimum strategy is (A2, B3).

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 No pure strategy or no saddle point exists.
 The optimal mix for each player may be determined by
assigning each strategy a probability of it being chosen.
Thus these mixed strategies are probabilistic combinations
of available better strategies and these games hence called
Probabilistic games.
 The probabilistic mixed strategy games without saddle points
are commonly solved by any of the following methods
◦ 2x2 Games (Analytical Method)
◦ Graphical Method
◦ Simplex Method

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Consider a 2x2 game without saddle point
 a11 a12 
a 
 21 22 
a
The optimum mixed strategies
 A1 A2   B1 B2 
SA =  SB = 
p2  q2 
&
 p1  q1
a22 − a21
Where p1 = ,
(a11 + a22 ) − (a12 + a21 )
 p1 + p2 = 1  p2 = 1 − p1
a22 − a12
q1 = ,
(a11 + a22 ) − (a12 + a21 )
 q1 + q2 = 1  q2 = 1 − q1
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∴ The value of the game is

a11a22 − a12 a21

V =
(a11 + a22 ) − (a12 + a21 )

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 Problem 1: Solve the following payoff matrix, determine
strategies and the value of the game.
B
5 1
A  B
3 4 
5 1
Solution: Given that the payoff matrix is A 
3 4

Here a11 = 5, a12 = 1, a21 = 3, a22 = 4.

a22 − a21 4−3 1

 p1 = = =
(a11 + a22 ) − (a12 + a21 ) (5 + 4) − (1 + 3) 5
1 4
 p2 = 1 − p1 = 1 − =
5 5

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 a22 − a12 4 −1 3
 q1 = = =
(a11 + a22 ) − (a12 + a21 ) (5 + 4) − (1 + 3) 5
3 2
 q2 = 1 − q1 = 1 − =
5 5

∴ The value of the game is

a11a22 − a12a21
V =
(a11 + a22 ) − (a12 + a21 )
V =
(5  4 ) − (1 3)
=
20 − 3 17
=
(5 + 4) − (1 + 3) 9−4 5
∴ The optimum mixed strategies
SA = (1/5, 4/5)
SB = (3/5, 2/5)
Value of the game V= 17/5.

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Problem 2: Solve the following payoff matrix, determine
strategies and the value of the game.
B
 4 − 4
A
− 4 4  B
 4 − 4
Solution: Given that the payoff matrix is A
− 4 4 
Here a11 = 4, a12 = -4, a21 = -4, a22 = 4.

a22 − a21
 p1 =
(a11 + a22 ) − (a12 + a21 )
4 − ( −4) 8 1
p1 = = =
(4 + 4 ) − (− 4 − 4 ) 16 2
1 1
 p2 = 1 − p1 = 1 − =
2 2
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 a22 − a12
 q1 =
(a11 + a22 ) − (a12 + a21 )
4 − ( −4) 8 1
q1 = = =
(4 + 4 ) − (− 4 − 4 ) 16 2
1 1
 q2 = 1 − q1 = 1 − =
2 2
∴ The value of the game is
a11a22 − a12 a21
V =
(a11 + a22 ) − (a12 + a21 )
V =
(4  4 ) − ((− 4 ) (− 4)) 16 − 16
= =
0
=0
(4 + 4) − (− 4 − 4) 16 16
 Definition: A strategy is dominated by a second strategy if
the second strategy is always at least as good (and sometimes
better) regardless of what the opponent does. Such a
dominated strategy can be eliminated from further
consideration.
 The following rules of dominance is used reduce the sixe of
the matrix
◦ Row dominance
◦ Column dominance
◦ Modified row dominance- Average of rows
◦ Modified column dominance- Average of columns

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Thus in our example (below), for player A, strategy A3 is
dominated by the strategy A2 and so can be eliminated.
Eliminating the strategy A3 , we get the

B1 B2 B3 B4
A1 8 6 2 8
A2 8 9 4 5
A3 7 5 3 5

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following reduced payoff matrix:
Now , for player B, strategies B1, B2, and B4 are dominated by
the strategy B3.
Eliminating the strategies B1 , B2, and B4 we get the reduced
payoff matrix:

B1 B2 B3 B4
A1 8 6 2 8
A2 8 9 4 5

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following reduced payoff matrix:
Now , for player A, strategy A1 is dominated by the
strategy A2.
Eliminating the strategy A1 we thus see that A should
always play A2 and B always B3 and the value of the
game is 4 as before.
B3
A1 2
A2 4

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Problem 2: Solve the following game

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Solution:
Player B Row
Min
B1 B2 B3 B4
A1 6 2 4 8 2
A2 2 -1 1 12 -1
Player A
A3 2 3 3 9 2
A4 5 2 6 10 2
Column Max 6 3 6 12

Here Maximin = 2 & Minimax = 3

∴ Maximin ≠ Minimax
Hence the game has no saddle point.
Since the column 4 is dominated by column 1. So column 4 is deleted, we get

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

Since the row 4 is dominated by row 2. So row 2 is deleted, we get

Player B
B1 B2 B3
A1 6 2 4
Player A A3 2 3 3
A4 5 2 6
Since the column 3 is dominated by column 2. So column 3 is deleted, we get
Player B
B1 B2
A1 6 2
Player A A3 2 3
A4 5 2

Since the row 1 is dominated by row 4. So row 4 is deleted, we get

Player B
B1 B2
A1 6 2
Player A A3 2 3
 B1 B2
A1 6 2 1
A3 2 3 4
1 4

The optimum strategy is

SA = (1/5, 0, 4/5, 0) & SB = (1/5, 4/5, 0, 0)

The value of game is

a11a22 − a12 a21
V =
(a11 + a22 ) − (a12 + a21 )
V =
(6  3) − (2  2 ) 18 − 4
= =
14
(6 + 3) − (2 + 2 ) 9 − 4 5
Problem 3: Solve the following game

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Solution:
Player B Row
Min
B1 B2 B3 B4
A1 3 2 4 0 0
A2 3 4 2 4 2
Player A
A3 4 2 4 1 1
A4 3 4 3 4 3
Column Max 4 4 4 4

Here Maximin = 3 & Minimax = 4

∴ Maximin ≠ Minimax
Hence the game has no saddle point.
Since the row 3 is dominated by row 1. So row 1 is deleted, we get

Player B
B1 B2 B3 B4
A2 3 4 2 4
Player A A3 4 2 4 1
A4 3 4 3 4

Since the column 1 is dominated by column 3. So column 1 is deleted, we get

Player B
B2 B3 B4
A1 4 2 4
Player A A3 2 4 1
A4 4 3 4
Since the row 4 is dominated by row 1. So row 1 is deleted, we get

Player B
B2 B3 B4
A3 2 4 1
Player A A4 4 3 4

Since the column 1 is dominated by column 3. So column 1 is deleted, we get

Player B
B3 B4
A3 4 1
Player A A4 3 4
 B3 B4
A3 4 1 1
A4 3 4 3
3 1

The optimum strategy is

SA = (0, 0, 1/4, 3/4) & SB = (0, 0, 3/4, 1/4)

The value of game is

a11a22 − a12 a21
V =
(a11 + a22 ) − (a12 + a21 )
V =
(4  4 ) − (3  1) 16 − 3 13
= =
(4 + 4 ) − (3 + 1) 8 − 4 4
 2 x n and m x 2 Games : When the player A, for example, has
only 2 strategies to choose from and the player B has n, the
game shall be of the order 2 x n, whereas in case B has only
two strategies available to him and A has m strategies, the
game shall be a m x 2 game.

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 Draw two vertical axes 1 unit apart.
The two lines are x = 0, x = 1
 Take the points of the first row in the payoff matrix on the vertical
line x = 1 and the points of the second row in the payoff matrix on
the vertical line x = 0.
 The point a1j on axis x = 1 is then joined to the point a2j on
the axis x = 0 to give a straight line. Draw ‘n’ straight lines for
j=1, 2… n and determine the highest point of the lower envelope
obtained. This will be the maximin point.
 The two or more lines passing through the maximin point
determines the required 2 x 2 payoff matrix. This in turn gives
the optimum solution by making use of analytical method.

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Let x be the probability of selection of Alternative 1 by player A and 1-x
be the probability of selection of Alternative 2 by player A .
The expected payoff functions of player A

A’s expected gain

B’s alternative A’s expected payoff function

x=0 x=1

B1 1.x+8.(1-x)=8-7x 8 1

B2 3.x+6.(1-x)=6-3x 6 3

B3 12.x+2.(1-x)=2+10x 2 12

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 B3

B1

B2

x=0 x=1
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The value of the game V = 66/13
∴ The optimum strategy is
SA = (4/13, 9 /13)
SB = (0, 10/13, 3 /13

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 Player B
1 3 -3 7
Player A
2 5 4 -6

Solution: Let x be the probability of selection of Alternative 1

by player A and 1-x be the probability of selection of
Alternative 2 by player A .
The expected payoff functions of player A as given below
A’s expected gain
B’s alternative A’s expected payoff function
x=0 x=1
B1 1.x+2(1-x) = 2-x 2 1
B2 3.x+5(1-x) = 5-2x 5 3
B3 (-3).x+4(1-x) = 4-7x 4 -3
B4 7.x-6(1-x) = -6+13x -6 7

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. 7
. 6
.
B2
5 5
4 4
B3
3 3
2 2 Maximin
B1
1 1
0 0
-1 -1
-2 -2
-3 B4 -3
-4 -4
-5 -5
-6 -6
x=0 x=1
∴ The solution to the origin 2x4 game reduces to
B3 B4
A1  − 3 7 
A2  4 − 6
B3 B4
A1  − 3 7  10

A2  4 − 6 10
13 7
∴ The optimum strategy is SA = (10/20, 10/20) SA
= (1/2, 1/2); SB = (0, 0, 13/20, 7/20)
a11a22 − a12 a21
V =
(a11 + a22 ) − (a12 + a21 )
V =
(( −3)  ( −6) ) − ((4 )  (7 )) 18 − 28
= =
− 10
=
1
(− 3 − 6 ) − (4 + 7 ) − 9 − 11 − 20 2
 Draw two vertical axes 1 unit apart. The two lines are x1 =0, x1
=1
 Take the points of the first row in the payoff matrix on the
vertical line x1 = 1 and the points of the second row in the
payoff matrix on the vertical line x1 = 0.
 The point ai1 on axis x1 = 1 is then joined to the point
ai2 on the axis x1 = 0 to give a straight line. Draw ‘m’
straight lines for i=1, 2… m and determine the lowest point of
the upper envelope obtained. This will be the minimax point.
 The two or more lines passing through the minimax point
determines the required 2 x 2 payoff matrix. This in turn
gives the optimum solution by making use of analytical
method.

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Solve by graphical method

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Let y be the probability of selection of Alternative 1 by player B and
1-y be the probability of selection of Alternative 2 by player B .
The expected payoff functions of player B

B’s expected value

A’s alternative B’s expected payoff function
y=0 y=1

A1 (-2).y+0.(1-y)= -2y 0 -2

A2 3.y-1(1-y) = -1+4y -1 3

A3 3.y+2(1-y) = 2+y 2 3

A4 5.y-4(1-y) = -4+9y -4 5

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y=0 y=1
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∴ Value of the game V = 3/9 = 1/3
∴ The optimum strategy is
SA = (0, 5 /9, 4/9, 0)
SB = (3/9, 6 /9) = (1/3, 2/3)

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Problem 2. Solve the following game by
graphical method

Player B
 1 − 3
 3 5 
 
 −1 6 
Player A  
 4 1 
 2 2 
 
− 5
 0 

Let y be the probability of selection of Alternative 1 by player B and
1-y be the probability of selection of Alternative 2 by player B .
The expected payoff functions of player B

B’s expected value

A’s alternative B’s expected payoff function
y=0 y=1

A1 1.y-3.(1-y)=-3+4y -3 1
A2 3.y+5.(1-y)=5-2y 5 3
A3 (-1).y+6.(1-y)=6-7y 6 -1
A4 4.y+1.(1-y)=1+3y 1 4
A5 2.y+2.(1-y)=2 2 2
A6 (-5).y+0.(1-y)=-5y 0 -5

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7 7
A3
6 6
Minimax
5 5
A2
4 4
3 3
A5
2 2
1 A4 1
0 0
-1 -1
-2 -2
-3 -3
A1
-4 -4
-5 A6 -5
-6 -6

y=0 y=1
∴ The solution to the original 6x2 game reduces
to B1 B2
A2  3 5
A4  4 1
B1 B2
A2  3 5 3

A4  4 1 2
4 1

∴ The optimum strategy is

SA = (0,3/5,0,2/5,0,0) ; SB = (4/5,1/5)
a11a22 − a12 a21
V =
(a11 + a22 ) − (a12 + a21 )
V =
(3 1) − (4  5) = 3 − 20 =
− 17 17
=
(3 + 1) − (4 + 5) 4 − 9 −5 5