Saddle Point

Chapter 0 · begins on page 3

Mathematical Foundations

The saddle-shaped table back to it on the cover
Try it yourself The saddle point Why does a two-by-two game have a value, and what does a mixed strategy guarantee? Open the engine →

What is proved, in words

The book follows each result with one sentence that says what it means without symbols. The formal statement is a click away; the proofs are in the book.

Proposition 0.10 · Commitment is never worse than the blind guarantee · p. 10

The best announcement available never leaves the leader below its guarantee against all follower behaviour, and the best rule conditioned on the follower's move is worth at least the best announced mixture, when every announcement carries over as a constant rule.

Proposition 0.10 · Chapter 0 · page 10

Commitment is never worse than the blind guarantee

In words The best announcement available never leaves the leader below its guarantee against all follower behaviour, and the best rule conditioned on the follower's move is worth at least the best announced mixture, when every announcement carries over as a constant rule.


Under either convention, , the guarantee computed against all feasible follower behaviour with the same admissible leader strategies. If every announcement (every mixture) has an outcome-equivalent constant rule in (the follower responds to the whole rule; observation, announcement costs and feasible actions unchanged), then for each fixed convention .

The proof is in the book: Chapter 0, Mathematical Foundations, page 10

Proposition 0.15 · Stratonovich's value bounds every experiment's value · p. 16

Counting bits bounds what information can be worth: no experiment with a given amount of mutual information beats Stratonovich's value at that amount, and the bound respects Blackwell's order.

Proposition 0.15 · Chapter 0 · page 16

Stratonovich's value bounds every experiment's value

In words Counting bits bounds what information can be worth: no experiment with a given amount of mutual information beats Stratonovich's value at that amount, and the bound respects Blackwell's order.


For every experiment with signal , , and is the supremum of over experiments with . If then , so the bound is monotone along Blackwell's order.

The proof is in the book: Chapter 0, Mathematical Foundations, page 16

Proposition 0.16 · Refinement helps its owner in zero-sum games · p. 16

In a zero-sum game, giving one side a finer observation with everything else fixed can only help that side; outside zero-sum games this fails, as Chapter 4 computes.

Proposition 0.16 · Chapter 0 · page 16

Refinement helps its owner in zero-sum games

In words In a zero-sum game, giving one side a finer observation with everything else fixed can only help that side; outside zero-sum games this fails, as Chapter 4 computes.


Consider a finite zero-sum game in which nature draws , player observes , player observes , and both then act once, with payoff . If 's observation is refined — for some , with and everything else unchanged — then the value for weakly increases.

The proof is in the book: Chapter 0, Mathematical Foundations, page 16

Theorem 0.6 · Minimax; von Neumann (1928) · p. 7

In every finite zero-sum game, once randomisation is allowed, the best can guarantee and the least can concede coincide: the game has a value.

Theorem 0.6 · Chapter 0 · page 7

Minimax; von Neumann (1928)

In words In every finite zero-sum game, once randomisation is allowed, the best can guarantee and the least can concede coincide: the game has a value.


In a finite zero-sum game the two sides of the bracket coincide: .

The proof is in the book: Chapter 0, Mathematical Foundations, page 7

Theorem 0.7 · The bridge · p. 8

Three descriptions of a solved zero-sum game (a pair neither side wants to leave, a pair of equal guarantees, a Nash pair) are the same thing; this is why the book can work with guarantees and best responses as its only two primitives.

Theorem 0.7 · Chapter 0 · page 8

The bridge

In words Three descriptions of a solved zero-sum game (a pair neither side wants to leave, a pair of equal guarantees, a Nash pair) are the same thing; this is why the book can work with guarantees and best responses as its only two primitives.


In a finite zero-sum game, for a pair the following are equivalent:

  • saddle point: for all ;
  • both guarantees attained and equal: ;
  • Nash equilibrium of the two-player game .

In that case .

The proof is in the book: Chapter 0, Mathematical Foundations, page 8

Theorem 0.11 · Germeier's value · p. 11

Under pessimistic ties, a leader that announces a deterministic rule responding to the follower's action has an explicit and attained best value, built from two ingredients: the best outcome for itself among those the follower strictly prefers to its own guarantee, and what it can secure by punishment; with ties in the leader's favour the strict preference becomes a weak one.

Theorem 0.11 · Chapter 0 · page 11

Germeier's value

In words Under pessimistic ties, a leader that announces a deterministic rule responding to the follower's action has an explicit and attained best value, built from two ingredients: the best outcome for itself among those the follower strictly prefers to its own guarantee, and what it can secure by punishment; with ties in the leader's favour the strict preference becomes a weak one.


Let the leader's and the follower's action sets , be finite, with payoffs for the leader and for the follower, and let the leader announce a rule . Put , the follower's guaranteed payoff;

  • Under the leader's value is , and it is attained.
  • Under it is .
The proof is in the book: Chapter 0, Mathematical Foundations, page 11

Theorem 0.14 · Blackwell (1951); Blackwell (1953) · p. 15

One experiment is more informative than another exactly when every decision-maker, whatever its decision problem, does at least as well with it — a ranking valid for all decisions at once, which is why many pairs of experiments are not ranked at all.

Theorem 0.14 · Chapter 0 · page 15

Blackwell (1951); Blackwell (1953)

In words One experiment is more informative than another exactly when every decision-maker, whatever its decision problem, does at least as well with it — a ranking valid for all decisions at once, which is why many pairs of experiments are not ranked at all.


Let and the signal sets be finite. if and only if, for every finite action set, every utility and every prior on (the same prior for both experiments), the optimal expected utility of a Bayesian decision-maker observing is at least that of one observing , actions, payoffs and observation costs being the same.

The proof is in the book: Chapter 0, Mathematical Foundations, page 15

Theorem 0.17 · Backward induction; Shapley's operator on a finite horizon · p. 18

With a finite horizon and the state seen before each move, a zero-sum stochastic game is solved backwards one date at a time, each date a matrix game — the recursion behind every finite-horizon value in the book.

Theorem 0.17 · Chapter 0 · page 18

Backward induction; Shapley's operator on a finite horizon

In words With a finite horizon and the state seen before each move, a zero-sum stochastic game is solved backwards one date at a time, each date a matrix game — the recursion behind every finite-horizon value in the book.


Consider a two-player zero-sum stochastic game with finite state set , finite stage action sets , and horizon . Before every simultaneous move both players observe the date and the state ; payoffs are the expected sum of stage rewards ; the stage model and the transition kernel are common knowledge; independently randomised actions are admissible. Define and, for ,

each a finite matrix-game value (Theorem 0.6 (p. 7)). Then the game starting at at date has value , and the policies that play an optimal mixture of the stage matrix at each are optimal; they are Markov, and need not be stationary.

The proof is in the book: Chapter 0, Mathematical Foundations, page 18

Lemma 0.5 · Bracketing · p. 7

Whatever each side does, what can guarantee never exceeds what can hold to; the only question is whether the two meet.

Lemma 0.5 · Chapter 0 · page 7

Bracketing

In words Whatever each side does, what can guarantee never exceeds what can hold to; the only question is whether the two meet.


For all : , hence .

The proof is in the book: Chapter 0, Mathematical Foundations, page 7

Lemma 0.8 · Certificates measure exploitability · p. 9

The distance between the two sides' guarantees is exactly the pair's total exploitability; a certificate is a proof that this distance is zero.

Lemma 0.8 · Chapter 0 · page 9

Certificates measure exploitability

In words The distance between the two sides' guarantees is exactly the pair's total exploitability; a certificate is a proof that this distance is zero.


In a finite zero-sum game, for any pair : . A certificate is precisely a proof that the total exploitability of the pair is zero.

The proof is in the book: Chapter 0, Mathematical Foundations, page 9

A parallax in history

1865 · Chapter 0 · p. 14

A message reaches the border

Then

Paris, 1865: twenty states sign the International Telegraph Convention, fixing one interface across borders.

Now

Electronic bills of lading: two jurisdictions choose a recognisable electronic process or paper (Section 0.8 (p. 20)).

1865 · Chapter 0 · page 14

A message reaches the border

Then

Paris, 1865: twenty states sign the International Telegraph Convention, fixing one interface across borders.

Now

Electronic bills of lading: two jurisdictions choose a recognisable electronic process or paper (Section 0.8 (p. 20)).


What happened

In the first decades of electric telegraphy, where lines crossed national borders, messages had to be stopped and translated into the system of the next jurisdiction D [International Telecommunication Union 2026]. Representatives of twenty states gathered in Paris at an International Telegraph Conference; on 17 May 1865 they signed the first International Telegraph Convention, a framework to standardise telegraph equipment, set uniform operating instructions and lay down common international tariff and accounting rules, and they established the International Telegraph Union to supervise later amendments to the agreement D [International Telecommunication Union 2026].

The model

The wire was field 6 of each administration's card: the action “send a message across the border” was feasible. The re-encoding at the border was field 3 and field 5 at once: the receiving office could not read the record as sent, and the cost of making it readable was paid in time by a clerk. In the coordination game of Exercise 0.9 (p. 25), the convention raises the return to joint adoption of one process (a change in payoffs, field 5), and the Union is a standing device for the public recommendation of Definition 0.12 (p. 13), whose only power is that obeying it is a best response when the other side obeys too R.

What could be known

Before the convention the speed of electricity was available and the message crossed the border at the speed of a clerk. What changed in 1865 was not the channel but the rule for what crosses it: the convention fixed the interface between organisations, so that a record readable on one side was readable on the other. Information can cross a physical border without crossing a semantic or legal one; the electronic-records situation at the end of Section 0.8 (p. 20) is the same sentence a century and a half later, with the legal standing of a record in place of its encoding.

Where the parallel stops

The convention is not a realisation of the numerical game: twenty administrations, tariffs and a standing union are not two players and a coin, and nineteenth-century institutions and market power differed. The box takes one mechanism from the episode, not a calibration; no number of 1865 enters any model.

In the book: Chapter 0, page 14All sixteen parallaxes on the timeline →

The people

Chapter 0 · Mathematical Foundations

John von Neumann

1903 – 1957

Born in Budapest, he studied mathematics there and chemical engineering in Zurich, taught in Berlin and Hamburg, and moved to Princeton in 1930; in 1933 he joined the first faculty of the Institute for Advanced Study. His work spans set theory, operator algebras, the mathematical foundations of quantum mechanics, ergodic theory, numerical analysis and the logical design of stored-program computers. In 1928 he proved the minimax theorem for finite two-person zero-sum games; with the economist Oskar Morgenstern he later wrote Theory of Games and Economic Behavior.

The life, in moments →

Main works

  • Zur Theorie der Gesellschaftsspiele (Math. Annalen 100, 1928)
  • Mathematische Grundlagen der Quantenmechanik (1932)
  • Theory of Games and Economic Behavior, with O. Morgenstern (1944)

Chapter 0 · Mathematical Foundations

Leonid V. Kantorovich

1912 – 1986

Educated at Leningrad University, he became a professor there in 1934, moved to Novosibirsk in 1960 and to Moscow in 1971. He worked on ordered vector spaces, approximation theory and numerical methods. A problem of allocating machine capacity in plywood production, brought to him in 1938, led to his 1939 work on what is now called linear programming, with its resolving multipliers; in 1942 he formulated the mass-transport problem as an optimisation problem. He shared the 1975 Nobel Memorial Prize in Economic Sciences with Tjalling Koopmans for contributions to the theory of optimum allocation of resources.

The life, in moments →

Main works

  • Mathematical Methods of Organizing and Planning Production (in Russian, 1939)
  • “On the translocation of masses” (in Russian, DAN SSSR 37, 1942)
  • The Best Use of Economic Resources (Russian 1959; English 1965)
  • Functional Analysis in Normed Spaces, with G. P. Akilov (Russian 1959; English 1964)

Chapter 0 · Mathematical Foundations

George B. Dantzig

1914 – 2005

Born in Portland, Oregon, he earned his Berkeley doctorate under Jerzy Neyman in 1946. As mathematical adviser to the US Air Force comptroller he formulated linear programming and, in 1947, the simplex method. He then worked at the RAND Corporation and at the University of California, Berkeley, and from 1966 at Stanford, where in 1974 he and Richard Cottle founded the Systems Optimization Laboratory. His later work includes decomposition methods for large structured programs and stochastic programming.

The life, in moments →

Main works

  • Linear Programming and Extensions (1963)
  • “Decomposition principle for linear programs”, with P. Wolfe (Operations Research 8, 1960)
  • Linear Programming, with M. N. Thapa: vol. 1, Introduction (1997), vol. 2, Theory and Extensions (2003)