What is a non zero sum game

In the business world, the non-zero sum game concept often reflects expanding markets where individual companies may grow even while losing market share. Non-zero sum games are best identified on a case-by-case basis. It appears that most complex, real-life interactions are non-zero. Zero sum games seem too exact, symmetrical and simplistic to have dominated modern civilization that has seen so many wide-ranging, positive-sum improvements. Even the poorest in many lands today enjoy indoor plumbing and refrigeration — provisions absent from royal palaces just a few generations ago!

Since uncertainties in the stock market connote gambling in the minds of some, shareholder transactions have often been viewed as win-lose propositions. Consider this counterexample. Suppose a shareholder sells at a capital gain and has a better use for the funds. This is in direct contrast to a Zero-Sum Game where one party's win necessitates another party's loss, such as in competitive games like basketball, where if one team wins, the other automatically loses.

A classic example of a Non-Zero-Sum Game situation is called the Prisoner's Dilemma, where two prisoners are interrogated separately, and are offered a bargain where if one confesses, he is set free, while the other prisoner is convicted for 10 years.

If both confess, they both face 2 years in prison. Dixit, Avinash K. New York: W. Straffin, Philip D. Game Theory and Strategy. Washington, D.

Another example is in a trading market, where all competing companies join forces together to extend the entire market size. Establishing a wide market structure would increase confidence in the market and lead to increased profits for all competitors.

It is important to note that a zero-sum game could result in a net negative result. And not necessarily a positive one. In the example of the prisoners above, if both prisoners were to confess, then it results in a net negative for both parties. The zero-sum idea commenced with the notion that a win could only be possible as a result of the opponent losing.

This belief was possible as a result of erroneous economic understanding and finance. This is where the participated entity was fixed and not changeable. And as such, having the notion that you can only achieve a profit by seeing to the loss of competition. The modern economy, on the other hand, has brought about more awareness. It makes us realize that not all competitions belong to this category. There is a possibility for all participants to record a win.

With a non-zero-sum game, the fate of both sides can go up and come down together. The most ideal form of the non-zero-sum game is a win-win scenario, in which the two sides gain from a deal.

For example, when players switch between two sports teams, and each team meets the demand, then the trade gives off a net positive-sum.

A non-zero-sum game, on the other hand, can as well produce a negative effect for the two teams, a lose-lose scenario. The net gain will become negative because the two teams have lost something.

Zero-sum games usually give a net gain of zero, with a team winning while the other is losing. And non-zero-sum games give a net positive or net loss.