FOR M.COM. STUDENTS

1. DR. JISHA S.KUMAR
ASSISTANT PROFESSOR
SREE KRISHNA COLLEGE, GURUVAYUR

3.  GAME : Activity between two or more persons
according to a set of rules.
at the end
each person receives some benefit or satisfaction or
suffers loss…
 Two or more opposite parties with conflicting
interests.
 They know the objectives and the rules of the
game.
 When one player wins, his opponenet loses.
 Competitive situation is called a Game

4. CHARACTERISTICS OF GAME THEORY
 Finite no.of competitors called Players.
 Finite no.of possible course of action.
 Outcome of each play is called Pay Offs.
 Gain or Loss of each player depends not only on the
choice made by him but also the choice made by his
opponent.

5. ASSUMPTIONS
 The player act rationally or intelligently.
 Each player has a finite set of course of action.
 The player attempt to maximize gain or minimize
losses.
 The players simultaneously select their respective
course of action.
 Payoffs is fixed and determined in advance.

6. STRATEGY
 Predetermined rule by which a player decides his
course of action.
 Types of Strategy
 Pure Strategy – Single Strategy.
Pre-determined strategy.
 It is a decision in advance of all plays to choose a
particular course of action.
 Mixed Strategy – Different Strategies. Guess work.
 Choice is done on the basis of probability distribution.

7. Pay off Matrix
 The gain and losses resulting from different moves and
counter moves, when represented in the form of a
matrix is called Pay off Matrix.
A Maximizing Player
B Minimizing Player
Each element of the pay off matrix is the gain of the
maximizing player.
The pay off values in each row of the matrix is the gain of
“A”.
The pay off values in each column of the matrix is the loss
of “B”.

8. MAXIMIN & MINIMAX PRINCIPLES
 MAXIMIN “Maximum” of
“Minimum” pay offs in each row.
 MINIMAX “Minimum” of
“Maximum ” pay offs in each column.
 MAXIMIN PRINCIPLE : Maximizing player (A) lists his
worst possible pay offs of all his potential strategies and
chooses that strategies which corresponds to the best.
 MINIMAX PRINCIPLE: Minimizing player (B) lists his
maximum losses from each strategy and selects that
strategy which corresponds to the least.

9. SADDLE POINT
MAXIMIN = MINIMAX
Value of the Game = “V”
Pay off value at the Saddle point is the Value of the
Game.
MAXIMIN for “A” = MINIMAX of “B”