Posted in Operations and Supply Chain Terms, Total Reads: 1644
Definition: Zero Sum Game
It talks about the win- lose situation as the pie from which our resources are distributed is fixed and unequal distribution would mean eating more than what is allocated and as a consequence reducing someone else’s share . Let us take a case where there are two competitors C & D selling ice-cream on a stretch of sea shore . The stretch is 200 meters long and both of them have allocated themselves 100 meters from the end .This is to ensure they do not enter each others’ territories and take away others’ share of revenue . Let us have a look at the profits in each of four scenarios .
The profits have been mentioned in the order (C,D)
D does not enter C’s territory
D enters C’s territory
C does not enter D’s territory
C enters D’s territory
When both C and D decide to cooperate then they are registering a daily profit of 400 Rs . D can increase its profit by 100 Rs further by trespassing the agreement however by doing that he also is also running the risk of losing the 400 in case C also violates the agreement . Similarly D can also see the scenario in the same way as seen by C and also runs the risk of losing complete 400 if D violates . Hence the appropriate step for both of them would be to cooperate so as to have maximum benefit and making it a win win situation for both .