{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

# quiz1 - Quiz 1 Questions ECOS3012 Strategic Behavior...

This preview shows pages 1–2. Sign up to view the full content.

Quiz 1 Questions ECOS3012 - Strategic Behavior, Semester 1, 2011 Note. Print out this file. Work our your solutions to the questions below. Log back into Blackboard, access Quiz 1 under “Online Quizzes Tab” and click “Submit” to submit your answers . Question 1. Assume that there are two states of the world and a typical action is denoted by a vector ( x, y ) where x 0 and y 0 denotes monetary reward in the two states. Consider the utility functions U ( x, y ) = x α y 1 / 2 , V ( x, y ) = α log( x ) + β log( y ) where 0 < α < β < 1. A decision maker is necessarily consistent with the expected utility hypothesis if her preferences are give by the utility A. Either U or V. B. Neither U nor V. C. Only U. D. Only V. Question 2. Suppose there are three states of the world and a typical action is given by a triple ( x, y, z ), denoting the monetary reward in the three states of the world. Consider two actions A = ( x, y, z ) and B = (ˆ x, ˆ y, z ). ( Both actions give the same reward in state 3). Now consider any other actions C = ( x, y, z * ) and D = (ˆ x, ˆ y, z * ) obtained from A and B by changing the reward in state 3. Suppose a Decision Maker (DM) is known to satisfy Expected Utility Hypothesis and it is known that she strictly prefers A to B.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}