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

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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. A. DM must strictly prefer C to D. B. DM may strictly prefer C to D but depends on the value of z * . C. DM may prefer C to D but this depends on payoffs in the first two states D. None of the above. Question 3.
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quiz1 - Quiz 1 Questions ECOS3012 - Strategic Behavior,...

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