




In mathematical game theory, a zerosum game is a game in which losses of some of the players are exactly offset by gains of other players. Chess, for instance, is a zerosum game, because a win for one player is a loss for another. Since the theory of a zerosum game has some straightforward implications, one of the first questions an economist will consider in analyzing a market is whether it should be modeled as a zerosum game or not. Very few business activities resemble a zerosum game. More typically, each side mutually benefits from an exchange. The stock market is sometimes mistaken for a zerosum game since one player's payment to buy shares is exactly matched by the other player's payment received for selling. The stock market is far from a zerosum game; substantial wealth is created. To be a zerosum game, all stocks would have to eventually revert back to the price at which they started trading. In contrast, the futures market is recognized as a zerosum game.
Rate this zerosum game definition...




Where is the market headed? The answer may surprise you. Find out with the exclusive & Barron's recommended charts of Chart of the Day. 

Popular Terms: 144a, debt service coverage, Zero Cost Collar, per diem, FICO score, class C shares, in escrow, EBITDA, 401a, command economy, deferred revenue, current ratio, reverse mortgage, whollyowned subsidiary, phantom income, dividends payable, annual return, stock split, balance sheet, APR, required rate of return, VIX, labor relations, LIBOR, FTSE, stock market close, 1035 exchange, real GDP, cancelled check, covered put, liquidity ratio, Key Rate Duration, diluted share, limit order, quality assurance, exdividend date, inflation, exdividend, average price per share, retained earnings, risk management, option premium, irrevocable trust, implied volatility, 1031 exchange, open position, margin rate, minority interest, deferred tax


 