Game Theory

Topics: Game theory, Nash equilibrium, Zero-sum Pages: 3 (949 words) Published: April 16, 2013
Game Theory
The game begins with a case that occurred on two prisoners. Both prisoners were suspected criminals and their work. Both prisoners were placed in a different room, then to be given the question of whether it is true they are committing a crime or not. Option given is: If the prisoner A prisoner confessed while B does not confess, then A will be free, while B will get a 6 month sentence. If they plead not guilty, then it will get a 1 month prison sentence. And if both confess, they will each get a 3 month prison sentence. Zero-sum game

In game theory and economic theory, a zero–sum game is a mathematical representation of a situation in which a participant's gain (or loss) of utility is exactly balanced by the losses (or gains) of the utility of the other participant(s). If the total gains of the participants are added up, and the total losses are subtracted, they will sum to zero.

Prisoners dilemma game is an archeptypal example of of a non-zero sum game.The distinction between a zero sum game and a non-zero sum game is crucial.In zero sum game,with two players for simplicity,the utilities of players always sum to zero wathever the game’s outcome.On certain simplifying assumption,a zero sum game is equivalent to a zero money sum game.In this circumstances,zero sum game are such that,whatever the outcome,one player’s monetary is gane and the other is loss.This contrast with non-zero sum games,where outcome do not simply involve transfer of money or utility between players.In non-zero sum gamess the interest of the players are not directly opposed and hence it may be possible for the players to gain from cooperation.Hence the assumption that the game is non cooperatively played takes on added aignificance with non-zero sum games Non-zero–sum

Many economic situations are not zero-sum, since valuable goods and services can be created, destroyed, or badly allocated in a number of ways, and any of these will create a net gain or loss of utility to...
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