In game theory, a saddle point refers to a specific outcome in a two-player zero-sum game, which means that one player’s gain or loss is exactly balanced by the other player’s loss or gain.

Get the **full solved assignment PDF of MMPO-001 of 2023-24** session now.

The concept is most commonly associated with matrix games, where each player has a set of strategies, and the payoff for each combination of strategies is represented in a payoff matrix.

A saddle point occurs at the intersection of a row and a column in the payoff matrix where the maximum value in the row is also the minimum value in the column. In other words, it is a cell in the matrix where the player choosing the row strategy cannot improve their outcome by unilaterally changing their strategy, and similarly, the player choosing the column strategy cannot improve their outcome by unilaterally changing their strategy.

Mathematically, for a matrix A representing the payoff structure of the game:

[ \text{There exists a saddle point at } (i, j) \text{ if } \max_i A_{ij} = \min_j A_{ij} ]

Here, (A_{ij}) represents the payoff in the cell at the intersection of the i-th row and j-th column.

The significance of a saddle point in game theory is that it represents a stable solution where neither player has an incentive to change their strategy given the opponent’s strategy. However, not all games have saddle points, and in some cases, more sophisticated solution concepts like Nash equilibria may be used to analyze strategic interactions.