zero sum game explained with examples
Zero-sum Game Explained with Examples
A 'Zero-sum Game' is a situation wherein any gain of a person is offset by an equivalent loss of another person. This Buzzle article explains this concept in 'Game Theory', with the help of examples.
"Even with a receptive audience, dominance is a zero-sum game: the more power and authority I have, the less you have."
― Adam M. Grant, Give and Take: A Revolutionary Approach to Success
Definition
In short, in case of a zero-sum game, the total of all the gains is equivalent to the total of all the losses. One party (or parties) loses, and another gains. As against that, in a no-win situation, it is not possible for the player to win at all.
Examples can be found in politics, business, operation research, games, etc. The following are some examples of the zero-sum game.
Two Person Game in 'Game Theory'
Game: Matching Pennies
This is a very simple game that is played between two players. Both players simultaneously choose either heads or tails. Both reveal their choices, and if their choices match, Player A gets a point/score, and Player B loses. On the other hand, if the choices mismatch, Player B gets a point, and Player A loses.In Economics and Trade
Movie: The Wall Street (1987)
A quote by the top-notch player of stocks in the market, Gekko:
"It's not a question of enough, pal. It's a Zero-sum game - somebody wins, somebody loses. Money itself isn't lost or made, it's simply transferred - from one perception to another. Like magic. This painting here? I bought it ten years ago for sixty thousand dollars. I could sell it today for six hundred. The illusion has become real, and the more real it becomes, the more desperately they want it. Capitalism at its finest."
― Gordon Gekko to Bud Fox, The Wall Street (1987)
This is a story of Bud Fox, a highly ambitious stock broker who is learning the nuances of the stock market. In a desperate bid to win Gekko as a client, he imparts some insider trading information to him. Bud realizes later that Gekko has simply used him for his own personal agenda.
Market of Futures and Options
The basic rule in economics is: one man's income is another person's expense. In speculative business, zero-sum game is most prominent, and wealth is transferred from one person to another. An option gives an investor the right to purchase a stock at a predefined rate for a specified tenure. It is usually used by investors as a hedging instrument. Thus, when the market price of any stock is very high, the investor can exercise his right to call (buy) the stock.Classic Games
Classic Examples of Zero-sum Games
► Chess and Poker are classic games that follow the zero-sum game theory. Poker is a card game wherein the total of all the losses is equivalent to the total of all the gains.
► Betting/Wagering: Betting or gambling in one of those speculative games whose end result is that, either of the parties will win.
► 'Rock Paper Scissors' Game
This is a very popular hand game. There are three symbols - rock, paper, and scissors. These are represented by hand gestures. The rules are: rock can break scissors, scissors can cut paper, and paper can cover a rock. Thus, either of the person wins. If both show the same symbol, the game is played again.In International Politics
Nations compete with one another for resources and power. When war is waged, both nations are seeking control and power. This is nothing but a zero-sum game situation. In a win-win situation, both nations will negotiate towards achieving what is best for both the economies.
A 'zero-sum game' thinking in all walks of life can encourage negative behavior. A feeling that induces you to think that, to win, you need to defeat someone, or cause loss to someone, will certainly deter harmony.