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Dr.

B Dayal
Prof B Dayal
COMPETITIVE SITUATION
COPETITIVE SITUATION OCCUR WHEN TWO OR MORE
PARTIES WITH CONFLICTING INTERESTS OPERATE.
 MARKETING DIFFERENT BRANDS OF A COMMODITY.
TWO OR MORE BRANDS OF AN ITEMS TRYING TO
CAPTURE THE MARKET BY ADOPTING VARIOUS
METHODS.
 CAMPAIGNING FOR ELECTION. TWO OR MORE
CANDIDATES WHO CONTEST AN ELECTION TRY TO
CAPTURE MORE VOTES BY ADOPTING VARIOUS
METHODS.
 FIGHTING MILITARY BATTLES. TWO FORCES FIGHTING
A WAR TRY TO GAIN SUPREMACY OVER ONE ANOTHER
BY ADOPTING VARIOUS COURSES OF ACTION.
WE CONSIDER EACH OF THE ABOVE SITUATIONS TO BE A
COMPETITIVE GAME WHERE THE PARTIES (PLAYERS)
ADOPT A COURSE OF ACTION (PLAY THE GAME).
COMPETITIVE GAME
CHARECTERISTICS OF A COPETITIVE GAME.
 THE NUMBER OF PLAYERS (COPETITORS) IS FINITE.
 EACH PLAYER HAS FINITE NUMBER OF COURSES OF
ACTION (MOVES).
 THE GAME IS SAID TO BE PLAYED WHEN EACH PLAYER
ADOPTS ONE OF HIS COURSE OF ACTION.
 EACH TIME THE GAME IS PLAYED, THE
CORRESPONDING COMBINATION OF COURSES OF
ACTION LEADS TO A TRANSACTION (PAYMENT) TO
EACH PLAYER. THE PAYMENT IS CALLED PAY-OFF
(GAIN). THE PAY-OFF MAY BE MONETARY (MONEY) OR
SOME SUCH BENEFIT AS INCREASED SALES ETC.
 THE PLAYERS DO NOT COMMUNICATE TO EACH OTHER.
 THE PLAYRS KNOW THE RULES OF THE GAME BEFORE
STARTING.
COMPETITIVE GAME
CHARECTERISTICS OF A COPETITIVE GAME.
N-PERSON GAME.
 A GAME IN WHICH n PLAYERS PARTICIPATE IS CALLED
n-PERSON GAME.
 A GAME IN WHICH TWO PERSONS PARTICIPATE, IS
CALLED TWO-PERSON GAME.
ZERO-SUM GAME.
 IF A GAME IS SUCH THAT WHENEVER IT IS PLAYED THE
SUM OF THE GAINS (PAY-OFF) OF THE PLAYERS IS
ZERO, IT IS CALLED ZERO-SUM GAME.
 A ZERO-SUM GAME WHICH HAS TWO PLAYERS IS
CALLED TWO-PERSON ZERO-SUM GAME. IT IS CALLED
“RECTANGULAR GAME”.
 IN A TWO-PERSON ZERO-SUM GAME, THE GAIN OF THE
ONE PLAYER IS EQUAL TO THE LOSS O THE OTHER.
TWO-PERSON ZERO-SUM GAME
(RECTANGULAR GAME)
A TWO-PERSON ZERO-SUM GAME IS ONE IN WHICH:
 TWO PLAYERS PARTICIPATE.
 THE GAIN OF ONE PLAYER IS THE LOSS OF OTHER.
PLAYERS – ‘A’ AND ‘B’
COURSES OF ACTION:
 PLAYER ‘A’ – A1, A2, A3, ------- AM
 PLAYER ‘B’ – B1, B2, B3, ------- BN
 PAY-OFF OF PLAYER ‘A’ – aiJ (i = 1,2----M;
J= 1,2,-----N)
 STRATEGY. STRATEGY OF A PLAYER IS THE PRE-DETERMINED
RULE BY WHICH HE CHOOSES HIS COURSE OF ACTION WHILE
PLAYING THE GAME.
 PURE STRATEGY. WHILE PLAYING A GAME, PURE STRATEGY OF A
PLAYER IS HIS PRE-DECISION TO ADOPT A SPECIFIED COURSE OF
ACTION, IRRESPECTIVE OF THE STRATEGY OF THE OPPONENT.
 MIXED STRATEGY. WHILE PLAYING A GAME, MIXED STRATEGY IS HIS
PRE-DECISION TO ADOPT HIS COURSE OF ACTION ACCORDING TO
CERTAIN PRE-ASSIGNED PROBABILITIES.
THUS, IF PLAYER A DECIDES TO ADOPT COURSES OF ACTION A1AND
A2 WITH PERSPECTIVE PROBABILITIES 0.4 AND 0.6, IT IS MIXED
STRATEGY.
TWO-PERSON ZERO-SUM GAME
(RECTANGULAR GAME)
PAY OFF MATRIX OF PLAYER A
PLAYER B
B1 B2-------------Bn

A1
a11 a12---------------a1n

a21 a22--------------a2n
PLAYER A A2
- - -
-
-
- - -

am1 am2---------------amn
Am
EXAMPLE 1
(2-FINGER MORRA GAME)
TWO PERSONS A AND B PLAY A GAME.
THEY SHOULD SIMULTENEOUSLY RAISE
THEIR HAND AND EXHIBIT EITHER ONE
FINGER OR TWO FINGERS. IF BOTH OF
THEM SHOW ONE FINGER OR BOTH SHOW
TWO FINGERS, A SHOULD PAY RS 10 TO B.
ON THE OTHER HAND, IF ONE PLAYER
SHOWS ONE FINGER AND THE OTHER
PLAYER SHOWS TWO FINGERS, B
SHOULD PAY RS 5 TO A.
MAKE THE PAY-OFF MATRIX
IDENTIFY THE STRATEGIES OF PLAYER A.
EXAMPLE 1

HERE, PAY-OFF MATRIX OF PLAYER A IS


PLAYER B
B1 (ONE FINGER) B2 (TWO FINGERS)

PLAYER A A1 -10 5
(ONE FINGER)

A2 5 -10
(TWO FINGERS)
MAXIMIN – MINIMAX PRINCIPLE
MAXIMIN. MAXIMUM OF THE ROW MINIMUM IN THE PAY-
OFF MATRIX IS CALLED MAXIMIN.
THUS, α = MAXi { MINJ (aiJ)}
THIS IS IS THE MAXIMUM GAIN FOR PLAYER ‘A’ OUT OF
THE MINIMUM GAINS OF THE ROWS (αi )
MINIMAX. THE MINIMUM OF THE COLUMN MAXIMUMS IN
THE PAY-OFF MATRIX IS CALLED MINIMAX.
THUS, β = MINJ {MAXi (aiJ)}
SADDLE POINT. SADDLE POINT IS THE POSITION WHERE
THE MAXIMIN AND MINIMAX COINCIDE.
α=β=V
IF THE MAXIMIN OCCURS IN THE Rth ROW AND IF MINIMAX
OCCURS IN Sth COLUMN, THE POSITION (R, S) IS THE
SADDLE POINT. HERE, V = aRS IS THE VALUE OF THE
GAME.
MAXIMIN – MINIMAX PRINCIPLE

THE VALUE OF THE GAME IS THE EXPECTED GAIN


OF PLAYER A WHEN BOTH THE PLAYERS ADOPT
OPTIMAL STRATEGY.
A GAME IS SAID TO BE FAIR IF ITS VALUE IS
ZERO.
IF A GAME HAS SADDLE POINT, AND IF (R, S) IS
THE SADDLE POINT, SUGGESTED SOLUTION TO
BOTH THE PLAYERS IS PURE STRATEGY. FOR
PLAYER A THE SUGGESTED SOLUTION IS AR.
FOR PLAYER B THE SUGGESTED SOLUTION IS
BS.
IF THE GAME DOES NOT HAS SADDLE POINT,
THE SUGGESTED SOLUTION IS MIXED
STRATEGY.
SOLUTION TO A GAME WITH
SADDLE POINT
CONSIDER A RECTANGULAR GAME WITH PLAYERS A AND
B. LET A1, A2, A3, --------AM BE THE COURSES OF ACTION
FOR PLAYER A. LET B1, B2, ---------- BN BE THE COURSES
OF ACTION FOR PLAYER B. THE ALGORITHM TO FIND
SADDLE POINT IS AS FOLLOWS:
 THE MINIMUM PAY-OFF IN EACH ROW OF THE PAY-OFF
MATRIX IS CIRCLED.
 THE MAXIMUM PAY-OFF IN EACH COLUMN IS BOXED.
 IF ANY PAY-OFF IS CIRCLED AS WELL AS BOXED, THAT
PAY-OFF IS THE VALUE OF THE GAME.
 THE CORRESPONDING POSITION IS THE SADDLE POINT.
LET (R, S) BE THE SADDLE POINT. THEN THE SUGGESTED
PURE STRATEGY FOR PLAYER A IS AR. AND FOR
PLAYER B IS BS. THE VALUE OF THE GAME IS ars..
EXAMPLE 2
(2-FINGER MORRA GAME)
TWO PERSONS A AND B PLAY A GAME. THEY
SHOULD SIMULTENEOUSLY RAISE THEIR HAND
AND EXHIBIT EITHER ONE FINGER OR TWO
FINGERS. IF BOTH OF THEM SHOW ONE FINGER
OR BOTH SHOW TWO FINGERS, A SHOULD PAY
RS 10 TO B. ON THE OTHER HAND, IF ONE
PLAYER SHOWS ONE FINGER AND THE OTHER
PLAYER SHOWS TWO FINGERS, B SHOULD PAY
RS 5 TO A.
MAKE THE PAY-OFF MATRIX
VARIFY WHETHER IT HAS SADDLE POINT. IF SO,
WRITE DOWN THE SOLUTION FOR THE GAME.
SOLVED PROBLEM 2
TWO PERSONS A AND B, WITHOUT SHOWING EACH
OTHER, PLACE A COIN EACH ON THE TABLE. IF THE
COIN HAPPENS TO BE OF THE SAME DENOMINATION,
PLAYER A WILL TAKE BOTH OF THEM. IF THEY HAPPEN
TO BE OF DIFFERENT DENOMINATIONS, PLAYER B WILL
TAKE BOTH OF THEM. SUPPOSE PLAYER A HAS A FEW
ONE RUPEE COINS AND TWO RUPEE COINS, AND
PLAYER B HAS ONE, TWO AND FIVE RUPEE COINS:
 MAKE THE PAY-OFF MATRIX OF A.
 VARIFY WHETHER IT HAS SADDLE POINT. IF SO, WRITE
DOWN THE SOLUTION FOR THE GAME.
 WHAT HAPPENS TO THE GAME IF BOTH THE PLAYERS
PLAY ONLY WITH ONE RUPEE AND TWO RUPEE COINS?
SOLVED PROBLEM 3
A LABOUR UNION OF A FIRM IS NEGOTIATING A NEW 5-
YEAR SETTLEMENT REGARDING PAYMENTS WITH THE
MANAGEMENT. THE OPTIONS THE UNION HAS ARE A1:
‘AGGRESSIVE BARGAINING’, A2: ‘BARGAINING WITH
REASONING’, A3: ‘CONCILIATORY APPROACH’. THE
LIKELY MODE OF RESPONSE FROM THE MANAGEMENT
ARE ‘B1: AGGRESSIVE BARGAINING’, ‘B2: BARGAINING
WITH REASONING’, ‘B3: LEGALISTIC APPROACH’ AND
‘B4: CONCIALATORY APPROACH’. THE GAINS TO THE
UNION IN EACH CASE ARE AS FOLLOWS:
MANAGEMENT WHAT STRATEGY
WOULD YOU
B1 B2 B3 B4
20 15 12 35 SUGGEST FOR THE
A1 TWO SIDES? WHAT
A2 25 14 8 10 IS THE VALUE OF
UNION
A THE GAME?
3 -5 4 11 0
SOLVED PROBLEM 4

SOLVE THE GAME


PLAYER B
B1 B2 B3

A1 6 12 7
PLAYER A
A2 7 9 8

IS THE GAME FAIR?


SOLVED PROBLEM 5
A TWO-PERSON ZERO-SUM GAME, HAS THE
FOLLOWING PAY-OFF MATRIX. SOLVE THE
GAME.
8 -1

3 0

0 -2

-7 -4

IS THE GAME FAIR?


DOMINANCE
 IN THE PAY-OFF MATRIX, IF EACH PAY-OFF IN THE Rth
ROW IS GREATER THAN THE CORRESPONDING PAY-OFF
IN THE Sth ROW, AR DOMINATES AS.
 IF EACH PAY-OFF IN THE Pth COLUMN IS LESS THAN THE
CORRESPONDING PAY-OFF IN THE Qth COLUMN, BP
DOMINATES BQ.
 SOME TIMES COMBINATION OF TWO OR MORE COURSES
OF ACTION MAY DOMINATE ANOTHER COURSE OF
ACTION.
 WHENEVER A COURSE OF ACTION (SAY AS OR BQ) IS
DOMINATED BY OTHERS, THAT COURSE OF ACTION CAN
BE DELETED FROM THE PAY-OFF MATRIX. SUCH
DELETION WILL NOT AFFECT THE CHOICE OF THE
SOLUTION.
 SUCH DELETION OF COURSE OF ACTION REDUCES THE
ORDER OF PAY-OFF MATRIX.
SOLVING GAMES USING
DOMINANCE
CONSIDER A RECTANGULAR GAME WITH PLAYERS A AND
B. LET A1, A2, A3, --------AM BE THE COURSES OF ACTION
FOR PLAYER A. LET B1, B2, ---------- BN BE THE COURSES
OF ACTION FOR PLAYER B.
 IN THE PAY-OFF MATRIX, IF EACH PAY-OFF IN THE Rth
ROW IS GREATER THAN THE CORRESPONDING PAY-OFF
IN THE Sth ROW, AR DOMINATES AS. AND SO AS IS
DELETED.
 IF EACH PAY-OFF IN THE Pth COLUMN IS LESS THAN THE
CORRESPONDING PAY-OFF IN THE Qth COLUMN, BP
DOMINATES BQ. AND SO BQ IS DELETED.
 THE ABOVE STEPS ARE REPEATED IN SUCCESSION
UNTIL THE SADDLE POINT IS REACHED. AND HENCE THE
SOLUTION IS WRITTEN DOWN.
SOLVED PROBLEM 6
SOLVE THE FOLLOWING GAME USING THE
DOMINANCE PROPERTY.

B1 B2 B3 B4

A1 20 15 12 35

A2 25 14 8 10

A3 -5 4 11 0
SOLVED PROBLEM 7
SOLVE THE FOLLOWING ZERO-SUM GAME
AND FIND ITS VALUE.
COMPANY Y
B1 B2 B3 B4

A 6 -2 4 1

B 6 1 12 3
COMPANY X
C -3 -2 -2 6

D 2 -3 7 7
SOLVED PROBLEM 8

IN A RECTANGULAR GAME, PAY-OFF


MATRIX OF PLAYER A IS
PLAYER B
B1 B2 B3

PLAYER A A1 4 7 0
A2 -1 3 6

WRITE DOWN THE PAY-OFF MATRIX OF PLAYER B.


TERMINAL QUESTION 1

SOLVE THE FOLLOWING RECTANGULAR


GAME
-2 2 0 5 -8
3 2 1 2 2
-1 3 0 -4 2
0 -5 -4 3 -2
TERMINAL QUESTION 2

IN A RECTANGULAR GAME, PAY-OFF


MATRIX OF PLAYER A IS
PLAYER B
B1 B2

PLAYER A A1 5 7
A2 4 0

SOLVE THE GAME


WRITE DOWN THE PAY-OFF MATRIX OF B AND THEN
SOLVE THE GAME.