You're here:  Home --> Dictionary --> Z --> Zero-sum Game

Option
Future
Warrant
Cannibalization

Zero-sum Game
Term category: General Business
In 10 words or less: A situation where one person's gains matches another person's losses.

Definition: Zero-sum games involve situations in which one person's gains are the result of another person's losses.  No wealth is created (or destroyed) in these games.

Examples: Examples of zero-sum games include options and futures.  If a person makes money on an options or future contract, it means the person who sold it to him lost money.  Another example is gambling: either you or the house win.

What about the stock market? The stock market is not a zero-sum game because stocks are not simply investments traded from one party to another.  Rather, they're representative of the underlying business.  So if the business creates value, the stock will do so for the investor as well.

Related Articles

Is Investing Gambling?
A lot of people think that the stock market is a big gamble. One of the big reasons why is because it's not a zero-sum game--wealth is actually created.

Commodity Trading
Commodity trading is a zero-sum game for investors and can be quite risky...

Zero-sum Games Explained on Wikipedia
Wikipedia has lots of information on zero-sum games...

Related Books

The Essential John Nash by John Nash
The Zero-Sum Society by Lester Thurow
What are the Odds? Lottery, Blackjack, and Zero-sum Games by Robert Zipf
The Zero-Sum Goal By Harvard International Relations Council

# -A - B - C - D - E - F - G - H - I - J - K - L - M - N - O - P - Q - R - S - T - U - V - W - X - Y - Z