The von Neumann Morgenstern Axioms Let P denote the set of lotteries over C and

The von neumann morgenstern axioms let p denote the

This preview shows page 6 - 16 out of 34 pages.

The von Neumann-Morgenstern AxiomsLetPdenote the set of lotteries overCand letdenote a binary relationon the set of lotteries. Consider the following axioms.A1. Transitivity. 6
Image of page 6
7
Image of page 7
Risk attitudesLetuXRbe a monotonically increasing utility function.For any lotterypon a setX, define the following:˜prepresent thecertainty equivalent ofp 8
Image of page 8
9
Image of page 9
Propose Decline Player 1: Proposer A simple bargaining situation 10
Image of page 10
Propose Decline Veto Sign Player 2: Responder Player 1: Proposer A simple bargaining situation 11
Image of page 11
Propose Decline Veto Sign Override Accept Player 1: Proposer Player 2: Responder Player 1: Proposer A simple bargaining situation 12
Image of page 12
Propose Decline Veto Sign Override Accept Player 1: Proposer Player 2: Responder Player 1: Proposer uone.inferior(D), utwo.inferior(D) uone.inferior(P,S), utwo.inferior(P,S) uone.inferior(V,A), utwo.inferior(V,A) uone.inferior(V,O), utwo.inferior(V,O) A simple bargaining situation 13
Image of page 13
U D L R L R a b a b a b a b Player 1 Player 2 Player 1 A Game of Perfect Information 14
Image of page 14
U D L R L R a b a b a b a b Player 1 Player 2 Player 1 A Game of Imperfect Information Player 1 does not know what Player 2 chose.
Image of page 15
Image of page 16

You've reached the end of your free preview.

Want to read all 34 pages?

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture