[Math] Value of the game from payoff matrix

decision-theorygame theory

I am absolutely new to decision theory . I came across this following payoff matrix in the book.(Math. Stats : John E Freund).

                  Player A 
                  I    II

 Player B 1       7    -4
          2       8     10

The value of the game is given as 8 units.However i . have a question . I agree the optimal strategy for Play B is "2" . But i want to argue that the optimal choice for player A is 2 . This is because in decision theory the assumption is made that "each player must choose a strategy without knowing what the opponent is going to do and that once a player has made a choice it can not be changed" ..Going by this logic, the optimal strategy for player A should be II , because i see in that case , the loss would be less overall for the moves of player B . This , logic if true gives the value of the game to be 10 , which is not correct. I want to know , where i am wrong.

Best Answer

The basic assumptions in a game theory are:

1) Each player is rational and tries to maximize his/her payoff in the game.

2) Each player knows that his/her opponent is rational and tries to maximize his/her payoff in the game.

You can solve this problem by Reducing by Dominance.

Since the entries in Row 2 are greater (or equal to) the corresponding ones in Row 1 (it implies Row 2 dominates Row 1, i.e. Player 2 is better off with strategy 2), we can eliminate Row 1 to get: $$\begin{array}{cc|cc} &&Player \ 1 \\ &&A&B \\ \hline Player \ 2 & 2 & 8 & 10 \end{array}$$ Since the entry in Column A is less than (or equal to) the corresponding one in Column B (it implies Column A dominates Column B, i.e. the Player 1 is better off with strategy A), we can eliminate Column B to get: $$\begin{array}{cc|c} &&Player \ 1 \\ &&A \\ \hline Player \ 2 & 2 & 8 \end{array}$$ So, the Player 2 has an advantage of $8$ units over Player 1.

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