Lecture 5

# Lecture 5 - where indifferent 4 p 1(c(1-p 1(c = p 1(d(1 p...

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Lecture 5 Wednesday, February 06, 2008 9:28 AM Strategic interaction a. Example: Bush is deciding on remain or withdraw from Iraq i. Condition of certainty, one game ii. Condition of uncertainty, games (P 1  = probability game 1 is true game) 1. EP(Remain)= p 1 (c) +(1-p 1 )(c) = c 2. EP(Withdrawal) = p 1 (d) + (1 - p 1 )(a) =  X 3. Set EP(Remain) = EP( Withdrawal) and solve for the threshold probability,

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Unformatted text preview: where indifferent 4. p 1 (c) +(1-p 1 )(c) = p 1 (d) + (1 - p 1 )(a); p 1 = (c-a)/(d-a) 5.-2/-3 = 0.6667, numerical indifference point, P 1 = is when if p 1 is greater than 2/3, then game is probably more likely to be the scenario....
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Lecture 5 - where indifferent 4 p 1(c(1-p 1(c = p 1(d(1 p...

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