
520 9 MARKOV CHAINS AND THE THEORY OF GAMES
In Exercises 9–18, determine whether the two-person,
zero-sum matrix game is strictly determined. If a game is
strictly determined,
a. Find the saddle point(s) of the game.
b. Find the optimal strategy for each player.
c. Find the value of the game.
d. Determine whether the game favors one player over
the other.
9. 10.
11. 12.
13. 14.
15. 16.
17. 18.
19. Robin and Cathy play a game of matching fingers. On a
predetermined signal, both players simultaneously extend
1, 2, or 3 fingers from a closed fist. If the sum of the num-
ber of fingers extended is even, then Robin receives an
amount in dollars equal to that sum from Cathy. If the sum
of the number of fingers extended is odd, then Cathy
receives an amount in dollars equal to that sum from
Robin.
a. Construct the payoff matrix for the game.
b. Find the maximin and the minimax strategies for Robin
and Cathy, respectively.
c. Is the game strictly determined?
d. If the answer to part (c) is yes, what is the value of the
game?
20. M
ANAGEMENT
D
ECISIONS
Brady’s, a conventional depart-
ment store, and ValueMart, a discount department store,
are each considering opening new stores at one of two pos-
sible sites: the Civic Center and North Shore Plaza. The
strategies available to the management of each store are
given in the following payoff matrix, where each entry rep-
resents the amounts (in hundreds of thousands of dollars)
either gained or lost by one business from or to the other as
a result of the sites selected.
ValueMart
Center Plaza
Brady’s
Civic Center
North Shore Plaza
c
2 ⫺2
3 ⫺4
d
≥
3 ⫺10⫺4
2102
⫺31⫺21
⫺1 ⫺1 ⫺21
¥£
1 ⫺13 2
1022
⫺223⫺1
§
≥
⫺12 4
23 5
01⫺3
⫺24⫺2
¥≥
12
03
⫺12
2 ⫺2
¥
£
242
030
⫺1 ⫺21
§£
1342
026⫺4
⫺1 ⫺3 ⫺21
§
£
32
⫺1 ⫺2
41
§c
13 2
⫺14⫺6
d
c
10
0 ⫺1
dc
23
1 ⫺4
d
a. Show that the game is strictly determined.
b. What is the value of the game?
c.
Determine the best strategy for the management of each
store (that is, determine the ideal locations for each
store).
21. F
INANCIAL
A
NALYSIS
The management of Acrosonic is
faced with the problem of deciding whether to expand the
production of its line of electrostatic loudspeaker systems.
It has been estimated that an expansion will result in an an-
nual profit of $200,000 for Acrosonic if the general eco-
nomic climate is good. On the other hand, an expansion
during a period of economic recession will cut its annual
profit to $120,000. As an alternative, Acrosonic may hold
the production of its electrostatic loudspeaker systems at
the current level and expand its line of conventional loud-
speaker systems. In this event, the company will make a
profit of $50,000 in an expanding economy (because many
potential customers will be expected to buy electrostatic
loudspeaker systems from other competitors) and a profit
of $150,000 in a recessionary economy.
a. Construct the payoff matrix for this game.
Hint: The row player is the management of the company and the
column player is the economy.
b. Should management recommend expanding the com-
pany’s line of electrostatic loudspeaker systems?
22. F
INANCIAL
A
NALYSIS
The proprietor of Belvedere’s is faced
with the problem of deciding whether to expand his restau-
rant facilities now or to wait until some future date to do
so. If he expands the facilities now and the economy expe-
riences a period of growth during the coming year, he will
make a net profit of $442,000; if he expands now and a
period of zero growth follows, then he will make a net
profit of $40,000; and if he expands now and an economic
recession follows, he will suffer a net loss of $108,000. If
he does not expand the restaurant now and the economy
experiences a period of growth during the coming year, he
will make a net profit of $280,000; if he does not expand
now and a period of zero growth follows, he will make a
net profit of $190,000. Finally, if he does not expand now
and an economic recession follows, he will make a net
profit of $100,000.
a. Represent this information in the form of a payoff
matrix.
b. Determine whether the owner of the restaurant should
expand his facilities at this time.
23. M
ARKET
S
HARE
Roland’s Barber Shop and Charley’s Bar-
ber Shop are both located in the business district of a cer-
tain town. Roland estimates that if he raises the price of a
haircut by $1, he will increase his market share by 3% if
Charley raises his price by the same amount; he will
decrease his market share by 1% if Charley holds his price
at the same level; and he will decrease his market share by
3% if Charley lowers his price by $1. If Roland keeps his
price the same, he will increase his market share by 2% if
Charley raises his price by $1; he will keep the same mar-
ket share if Charley holds the price at the same level; and
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