A zero-sum game is a mathematical representation in game theory and economic theory of a situation that involves two sides, where the result is an advantage for one side and an equivalent loss for the other. In a zero-sum game, the total gains and losses of the participants sum to zero, meaning that one persons gain is equivalent to another person's loss, resulting in no net change in wealth or benefit. Here are some key points about zero-sum games:
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Zero-sum games are a specific example of constant sum games where the sum of each outcome is always zero. Such games are distributive, not integrative, meaning that the pie cannot be enlarged by good negotiation.
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Zero-sum games can be found in various contexts, including poker, gambling, chess, and tennis. In these examples, the sum of the amounts won by some players equals the combined losses of the others.
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Derivatives trading is often cited as a zero-sum game, as every dollar earned has to be lost by another party to the transaction.
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In a two-player zero-sum game, whatever one player wins, the other loses, and the players share no common interests. There are two general types of zero-sum games: those with perfect information and those without.
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In real-life situations, things are not always as clear-cut, and gains and losses can be difficult to quantify. Zero-sum games are the opposite of win-win situations, such as a trade agreement that significantly increases trade between two nations, or lose-lose situations, like war.
