Zero Sum Game

Posted in Operations and Supply Chain Terms, Total Reads: 1677
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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

(400,400)

(0 ,500)

C enters D’s territory

(500,0)

(0,0)

Case Analysis

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 .

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