Problem Set 1

Due Tuesday 02/09/10
Econ 3200  Introduction to Econometrics
Spring 2010
Cornell University
Prof. Molinari
1. Two professors, a macroeconomist and an econometrician, are driving south to visit their
friend in Princeton.
Neither of them knows precisely how to get there.
They arrive at a
twoway intersection, and they have to decide which of roads
A
or
B
to take. Only one of
these two roads leads to Princeton, while the other would take them to Pennsylvania (and of
course there is no road signal indicating the direction to Princeton). If the macroeconomist
was to decide which road to take, he would choose the correct one with probability
p:
If the
econometrician was to decide, she would choose the correct one with probability
q
. Consider
two strategies the couple could follow:
(i)
Randomly choose one of them (probability
1
2
for each) and let that person decide which
road to follow; or
(ii) Have them both think about what road should be taken and then either take the road
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 Spring '08
 NEILSEN
 Econometrics, Probability, Probability distribution, Probability theory, princeton, Xn

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