Sociology Index

Zero-Sum Game

In a zero-sum game no wealth is created or destroyed. In a two-player zero-sum game, whatever one player wins, the other loses. Zero sum game is a political situation in which whatever is gained by one side is lost by the other so that the net change is always zero. The theory of zero-sum game is different from non-zero-sum game, because a solution can always be found. If the only way for you to gain a particular sum is to deprive someone else an equivalent sum, you're in a zero-sum game. Zero-sum thinking was an evolutionary adaptation to a time when we lived in hunter-gatherer society, says neuroscientist Dan Meegan. Resources such as food and mates were finite, so more for one person meant less for another. For some people, free trade really is a zero-sum game, according to Meegan.

What is a Zero Sum Game?

A zero sum game is a situation where losses incurred by a player in a transaction result in an equal increase in the gains of the opposing player. It is named this way because the net effect after gains and losses on both sides equals zero. To better understand the term zero-sum game, it is beneficial to analyze game theory, as well as management games. A zero-sum game is one type of management game in which all the payoffs for all players total zero; what one player or group gains, the other loses.

A payoff matrix can be arranged to identify the payoffs for each player. The matrix is expressed in terms of the payoff to A, whereas B's payoffs are the negative of A's, thus satisfying the condition that their sum be zero. Positive entries indicate payments by B to A and negative entries indicate payments by A to B.

What is a Non Zero Sum Game?

Non zero sum games don’t have to create a net positive result, and non zero sum games could also be negative. A non zero sum game is a situation where there is a net benefit or net loss to the system based on out the outcome of the game. An example of what should not be considered a non zero sum game is a contest between a trade ship and a pirate ship. Here, a victory for the pirates would mean gain of wealth, resources, and men, whereas a win for the trade ship would only mean a defeat of the challenge by the pirates.

The Winners and Losers of the Zero-Sum Game: The Origins of Trading Profits, Price Efficiency and Market Liquidity - Lawrence Harris, USC Working Paper, May 1993. 
Abstract: Trading is a zero-sum game when measured relative to underlying fundamental values. No trader can profit without another trader losing. People trade because they obtain external benefits from trading. These benefits include expected returns from holding securities, risk reduction from holding correlated assets and gambling entertainment.

Is War a Zero-Sum Game? Evidence from the U.S. Civil War
Marc D. Weidenmier, Claremont Colleges Working Papers.
Abstract: A new daily data set of Confederate cotton bonds trading in Liverpool is analyzed in conjunction with Union Greenback prices to asses the impact of war news on Civil War asset prices. The empirical evidence analysis indicates the presence of a cointegrating relationship between Union Greenback prices and cotton bond prices after controlling for innovations in the cotton and bond markets.

Work and Life: The End of the Zero-Sum Game
by Perry Christensen , Jessica DeGroot and Stewart D. Friedman. Harvard Business Review.
People have always had children and elderly parents to care for; they have always pursued hobbies and devoted time to community activities. In the past, many managers dealt with such personal needs summarily: “What you do in the office is our business. What you do outside is your own.” It was assumed, too, that employees would put the company’s interests first. Work versus personal life, after all, was a zero-sum game.