The maximin approach involves choosing the alternative with the highest or lowest payoff

Such a device is called a utility function. The logical issues associated with the second sort of situation kicking the person as opposed to the rock are typically much more complicated, as a simple hypothetical example will illustrate. Here, II faces a choice between a payoff of 2 and one of 0.

Note that this is not like the situation in the PD, where the socially superior situation is unachievable because it is not a NE. The second topmost branch has a payoff of 3 because although C sells well you gain 4S does not you lose 1.

Unfortunately, it is impossible to consider all possible combinations of every variable in a typical problem. We can put this another way: If neither of them confess, they each get a payoff of 3 2 years in prison each.

People are said to be risk averse if, facing two risky decisions with equal expected profits, they choose the less risky decision.

Suppose that the police have arrested two people whom they know have committed an armed robbery together. Player I's payoff appears as the first number of each pair, Player II's as the second.

For example, consider the following situation, in which no probabilities are involved. Find the expected value of each alternative by multiplying the probability of occurrence for each state of nature by the payoff for that state of nature and summing them: When they do so, column t1 is then strictly dominated, and the NE s1-t2 is selected as the unique solution.

They do, however, have enough evidence to send each prisoner away for two years for theft of the getaway car. Experimental test of Proposition 2. Therefore, the ranges for P no new bridge are A: The manager has narrowed the choices to two: In fact, neither of us actually needs to be immoral to get this chain of mutual reasoning going; we need only think that there is some possibility that the other might try to cheat on bargains.

Tic-tac-toe is a simple example of such a game: These outcomes all deliver the payoff vector 0, 1. To do this, identify the best payoff under h state of nature.

Game Theory

We can specify one class of games in which NE is always not only necessary but sufficient as a solution concept. But why should a reasonable player not be permitted to consider, or at least entertain the possibility, of bilateral, or even multilateral deviations?

Trees are used to represent sequential games, because they show the order in which actions are taken by the players. Furthermore, his probable responses should be expected to visit costs upon you, which you would be wise to consider.a. the risk per unit of expected payoff. b. the risk-adjusted expected value.

c. the payoff per unit of risk. d. a decision maker's risk-return tradeoff.

True/False Quiz

Start studying Connect 5S. Learn vocabulary, terms, and more with flashcards, games, and other study tools. Maximin. Choose the alternative with the best of the worst possible payoffs.

and choose the alternative that has the best expected payoff. This approach is most appropriate when the decision maker is neither risk averse nor risk seeking. choose the alternative that has the highest expected monetary value (or lowest expected cost.

A set of Alternative Actions: we may choose whichever one of these we please 2. Thus in a problem that we might approach through Decision Analysis, the things turn out for the best, provides the highest payoff.

In other words, Maximize the maximum payoff. Either the decision maker is extremely optimistic, or he or. MaxiMin: Choose the alternative with the best of the worst possible payoffs: Write down the SMALLEST number from each ROW and Pick the HIGHEST number as answer.

MaxiMax: Choose the alternative with the best possible payoff: Write down the HIGHEST number from each row and pick the HIGHEST number as answer. Choose your answers to the questions and click 'Next' to see the next set of questions. You can skip questions if you would like and come back to them later with the yellow "Go To First Skipped.

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The maximin approach involves choosing the alternative with the highest or lowest payoff
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