Theory of non cooperative games

Suppose organizations X and Y want to minimize their cost by outsourcing their marketing activities. However, they have a fear that outsourcing of marketing activities would result in increase of sale of the other competitor. The strategies that they can adopt are either to outsource or not to outsource the marketing activities. In Table, it can be seen that both the organizations X and Y are unaware about the strategy of each other.

Both of them work on the perception that the other one would adopt the best strategy for itself. Therefore, both the organizations would adopt the strategy, which is best for them. The same example can also be used for the explanation of sequential move games. Suppose organization X is the first one to decide whether it should outsource the marketing activities or not. In Figure-3, the first move is taken by organization X while organization Y would take decision on the basis of the decision taken by X.

However, the final outcome depends on the decision of organization Y. In the present case, the second player is aware of the decision of the first player. Constant sum game is the one in which the sum of outcome of all the players remains constant even if the outcomes are different.

Zero sum game is a type of constant sum game in which the sum of outcomes of all players is zero. In zero sum game, the strategies of different players cannot affect the available resources. Moreover, in zero sum game, the gain of one player is always equal to the loss of the other player.

On the other hand, non-zero sum game are the games in which sum of the outcomes of all the players is not zero. A non-zero sum game can be transformed to zero sum game by adding one dummy player. The losses of dummy player are overridden by the net earnings of players.

Examples of zero sum games are chess and gambling. In these games, the gain of one player results in the loss of the other player.

However, cooperative games are the example of non-zero games. This is because in cooperative games, either every player wins or loses.

In symmetric games, strategies adopted by all players are same. Symmetry can exist in short-term games only because in long-term games the number of options with a player increases. The decisions in a symmetric game depend on the strategies used, not on the players of the game.

Even in case of interchanging players, the decisions remain the same in symmetric games. On the other hand, asymmetric games are the one in which strategies adopted by players are different. In asymmetric games, the strategy that provides benefit to one player may not be equally beneficial for the other player.

However, decision making in asymmetric games depends on the different types of strategies and decision of players.

Example of asymmetric game is entry of new organization in a market because different organizations adopt different strategies to enter in the same market. Article Shared by. Related Articles. Payoff Matrix for Nash Equilibrium. Difference between Price and Non-price Competition. We use cookies We use cookies to personalise content and ads, to provide social media features and to analyse our traffic.

Non-cooperative games provide accurate results. This is because, in non-cooperative games, a very deep analysis of a problem takes place throughout the game without any help. I could honestly relate these game types to almost every game I play with friends.

They fit in every game and can intervene with other game types due to the fact you can only play with or without other players. Bompard et al. They provide a set of game components specifically for the electricity market, which is a very rigid market with low flexibility and low chances of negotiating because of fixed distribution infrastructure and supplier locations with respect to customers.

Singh provides an example for the electricity market. We assume that there are two power generators, both can choose to produce at a high level or a low level. The following table shows the different combinations of outputs Singh. The following table illustrates the profits that each producer can expect from the production scenarios given above. We see that the profits show similar tendencies as the Prisoner's Dilemma, see Figure 1.

This no market control, the Nash Equilibrium will be in the shaded area maximized profit at highest price and lowest production A way to control this situation is to apply contracts for differences Singh. This allows for a shift in Nash Equilibrium to a more beneficial situation for consumers.

According to Green , the non-cooperative game unaided judgment can be applied to forecasting market decisions. This is however, less accurate than using the role playing method and should be used with care Green, Non-cooperative games or broader, game theory has also been applied to biology. The so-called evolution stable strategy is used to describe games that have two different players each one with a specific set of strategies and benefits "fitness" of that strategy.

This theory has been used to explain the relatively constant equilibrium female to male ratio of Taylor, Lundberg et al. They assume that in each family, there are two decision makers that have an equal decision power and own utility function.