19M503 OPERATIONS RESEARCH

ASSIGNMENT PRESENTATION

GAME THEORY
21M209 Chetthna MRG
21M217 Iniyan V S
21M241 Samuthra P T
21M244 Santhoshkumar S
21M252 Sreeram Chandar M
21M259 Vishal A P
 introduction
⮚ Game theory came into existence in the 20th century.

⮚ In 1944 John Von Neumann and Oscar Morgenstern published a

book “Theory of game and Economic Behaviour”, in which they
discussed how businesses of all types may use this technique to
determine the best strategies given a competitive
business environment.

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 What is game theory?
❖ Game is defined as an activity between two
or more persons involving activities by each
person according to a set of rules , at the
end of which each person receives some
benefit or satisfaction or suffers loss.
❖ Game theory attempts to study “decision
making in situations where two or more
intelligent and rational opponents are
involved under conditions of
conflict and competition”.

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 ASSUMPTIONS
• There are finite number of competitors.
• There is conflict of interests between them.
• Each player has available with him finite number of possible
strategies(courses of action).
• One player attempts to maximize gains and the other attempts
to minimize losses. Players know all possible available choices
but does not know which one is going to be chosen.

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 ASSUMPTIONS

❖ Players simultaneously select their respective courses of

action.
❖ The payoff is fixed and determined in advance.
❖ Players have to make individual decisions without
direct communication.

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 APPLICATIONS
01 Mathematics 06 International Relations 11 Management
02 Computer Science 07 Philosophy 12 Sports

03 Biology 08 Psychology 13 Game Playing

04 Economics 09 Military Strategy

05 Political Science 10 Law

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 terminology
● PLAYER – Each participants (party) is called a player.
● STRATEGY – The decision rule by which a player
determines his choice (course of action) is called
strategy.
● PURE STRATEGY – If a player decides to use one
particular choice during every play, he is said to use a
pure strategy. Pure strategy is represented by a number
with which the choice is associated.

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 terminology
• MIXED STRATEGY – If a player decides in advance
to use all or some of his available choices in some
fixed proportion, he is said to use mixed strategies
with some fixed probability.
• PAY OFF – Payoff is the outcome of playing the
game.

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 Classification of game
GAME

NUMBER OF SUM OF
STRATEGY
PLAYERS GAMES

⮚ One player ⮚ Zero sum ⮚ Pure

game strategy
⮚ Two player
⮚ Non zero ⮚ Mixed
⮚ n player sum game strategy
(n>2)
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 Rules for game theory
RULE 1: Look for pure Strategy (Saddle point).
RULE 2: Reduce game by Dominance.
If no pure strategies exist, the next step is to eliminate certain
strategies(row/column) by law of Dominance.
RULE 3: Solve for mixed Strategy.
A mixed strategy game can be solved by different method, such as
1. Arithmetic Method
2. Algebraic Method
3. Graphical method
4. Matrix Method
5. Short Cut Method
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 Play of game

A play of the game is said to occur

when each player chooses one of his
choices. So, that no player(participants)
knows the choice of other.

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 Two person zero-sum game
● A game with two players, where a gain of
one player equals the loss to the other is
known as a two-person zero-sum game.

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● In such a game interests of the two
players are opposed so that the sum of
their net gains (sum of the game) is zero.

● Two-person zero-sum games are also

called rectangular games because their
payoff matrix is in the rectangular form.

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 PAY-OFF MATRIX
● Payoff is the outcome of playing the PLAYER B
game. A payoff (gain of game) matrix is P 1 2 ….. j n
a table showing the amounts received L
1 a(11) a(12 ….. a(1j) a(1n
A
by the player named at the left hand Y ) )
side after all possible plays of the E 2 a(11)
R
game. The payment is made by the ……
player named at the top of the table. A
i a(i1)
m a(m1)
• If player A has m strategies and player B has in strategies,
then a payoff matrix may be constructed as follows:
i. Rows denote the strategies of Player A
ii. Columns denote the strategies of Player B
iii. Player B's payoff matrix will be obtained by multiplying -1 to that of Player A.
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PAY-OFF MATRIX

Pay off matrix of rock-paper-scissors

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 terminology
● MAXIMIN PRINCIPLE - Maximize the player's
minimum gains. That means, select the strategy
that gives the maximum gains among the row
minimum values.
● MINIMAX PRINCIPLE - Minimize the player's
maximum gains. That means, select the strategy
that gives the minimum loss among the column
maximum values.

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 terminology
● SADDLE POINT - Saddle point(Equilibrium point) is
the point of intersection of the two courses of action
where minimax = maximin (=Value of game).
● FAIR GAME - The game is said to be fair, if
minimax = maxmin = 0, otherwise it is said to be
strictly determinable.
● OPTIMAL STRATEGIES - The strategies that give
the saddle point are said to be optimal strategies.

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EXAMPLES

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1.

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REFERENCES
BOOKS : 1.Operations Research by Dharani Venkatakrishnan.S.
2.Introduction to Operations Research by Frederick S,
Hillier and Gerald J. Lieberman.
3.Operations Research by B.J.Ranganath,SriKantappa A.S.
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