Chapter 5 : Probabilistic Models (Decision Theory and Game Theory) Q. 5.1.

What do you mean by zero sum game and two person zero sum games in game theory?

Ans. Zero sum game: It is the game in which the sumof payments to all the players after the play of the game is zero. Two person zero sum game : It is a game involving two players, in which the gain of one player equals the loss of other. Q. 5.2. What is saddle point and game value in game theory? Ans. Saddle point : Saddle point is the number, which is lowest in its row and highest in its column. - Game value : It is the average wining per play over a long no. of plays.

Q. 5.3. Write short note on pure strategy. How it differ from mixed strategy?

Ans Pure strategy If a player knows exactly what the other player is going to do, a deterministic situation is obtained and objective function is to minimize the gain Therefore the pure strategy is a decision rule always to select a particular course of action. Mixed strategy If a player is guessmg as to which activity is to be selected by the other on any particular occasion, a probabilistic situation is obtained and objective function is to maximize the expected gain. Thus, the mixed strategy is a selection among pure strategies withfixed probabilities.

Q. 5.4. Indicate the difference between decision making under risk and uncertainty in statistical decision theory. Ans Decision making under risk In this case more than one states of nature exist and there is enough information available to assign probability to each of the possible state.

Decision making under uncertainty : Here more than one state of nature exists but there is no information about the various states, not even sufficient knowledge to assign probabilities to them. Q 5.5 Enumerate the vanous quantitative methods which are used for decision making under uncertainty and decision making under risk Ans Decision making under uncertainty 1 Criterian of optimism 2. Criterian of pessimism. 3. Minimax regret criterion. 4. Criterion of realism. 5. Laplace criterion. Decision making under risk: 1. Expected value criterion 2 Expected opportunity loss criterian 3 Expected value of perfect mformation 4. Use of incremental analysis.

Q. 5.6. List the steps in decision, making approach.

Ans. 1. List all the alternatives. 2. Identify the expected future events. 3 Construct a payoff table 4. Select optimum criterion.

Q 5.7 Distinguish between game of strategy and game of chance

Ans Game of strategy If in the game the actions are determined by skills, at is called a game of strategy Game of change If m the game the actions are determmed by chance, it is termed as game of chance.

Q 5.8 What do you mean by optimal strategy? Ans Optimal strategy The strategy that puts the player in the most preferred position irrespective of the strategy of his opponents is called an optimal strategy Any deviation from this strategy would reduce his payoff

Problems Problem 5.9. Mr. Sinha had to decide whether or not to drill a well on his firm. In his village, only 40% of the wells drilled were successful at 200 feet of depth. Some of the formers who did not get water at 200 feet drilled further upto 250 feet but only 20% struck water at 250 feet. Cost of chilling is Rs. 50 per foot. Mr. Sinha estimated that be would pay Rs. 18000 during a 5 years period in the present value terms, if he continues to buy water from the neighbour rather than go far well which would have a life of 5 years. Mr. Sinha has three decisions to make. (a) Should he drill upto 200 feet (b) if no water is found at 200 feet, should he drill upto 250

feet? (c) should he continue to buy water from his neighbour.

Thus the optimal course of action for Mr. Sinha is not to drill the well and pay Rs. 18000 for water to his neighbour for five years.

Problem. 5.10. Find the value of games shown below also indicator whether they are fair or strictly determinable

Solution.

Solution. (a)

Saddle point = (I, IV) Game value 0 Strategy of A = Al Strategy of B = B IV Since maximum = Minimax = 0 So game = Fair.

Problem. 5.11. In a game of matching coins, player A wins Rs. 2. If there are two heads, win nothing if there are two tails and loses Rs. 1. When there are one head and one tail. Determine the pay off matrix, best strategies for each player and the value of game to A. Solution. The payoff matrix for A will be

There is no saddle point By Arithmetic method

Player A best strategy (0.25, 0.75)

Player B best strategy (0.25, 0.75) Game value Let B plays H; Value of the game

Problem 5.12. (By Dominance) Two players P and Q play a game. Each of them has to choose one of three colours, white (W) Black (B) and Red (R) independently of the other. There after the colours are compared. If both P and Q have choosen white (W,W) neither win anything. If player P selects white and player Q black (W, B), player P loses Rs. 2 or player Q wins the same amount and so on. The complete payoff table is shown. Find the optimum strategies for P and Q and the value of the game.

Solution.

There is no saddle point

By dominance rule for column, 3 column may be removed. The resulting matrix is

By dominance rule for row, row may be removed The resultmg matrix (2 x 2) is

Applying Arithmatic method

Optimum strategies for P

Problem. 5.13. Solve the following games by reducing them to 2 x 2 games by graphical method.

 reduce by dominance rule for column 2 and 5th column may be deleted as dominated by 4th and 3 column. The resulting matrix is
1.

No saddle point

Resulting matrix

expected payoff the two lines which intersect at lowest pomt of upper bound show the two course of action A should choose in his best strategy. The resulting matrix is

5.14. Solve the following game.

Solution There is no saddle point in the game By rule of dommance for column 1st and 3 column may be deleted as dominated by 2nd and 4th column respectively. Thus the resulting matrix is

Problem, 5.15. Obtain the optimal strategies for both persons and the value of the game for zero sum two person game whose payoff matrix is given as follows:

Solution. There is no saddle point m the game by rule of dominance for column 2nd, 4th and 5th column are dominated by 1st column and 3rd column dommated by 6th column hence 2nd, 4th, 5th and 3rd column may be removed. The resulting matrix is (2x2).