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Flashcards in Topic 2 Deck (5)
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1
Q

What is the investment decision ?

A

How much would you invest in a public fund, compared to a private account, if they would pay you different returns ?

2
Q

What are the elements of game theory?

A

Players- more than one decision maker
Interaction- what a player does must affect the other player(s) - player i’s actions must affect player j’s payoffs
Strategic decision- players are aware of their interaction- player i is capable of thinking of what player j would do
Rationality- best actions- players rank every possibly outcome according to own preferences, decisions based on goal of maximising own payoffs

3
Q

Representation of expected utility

A

Expected utility- U=p1u(X1) + p2u(X2) + … + pnu(Xn)

4
Q

What are the ‘rules’ of a game?

A
  • WHO is playing
  • WHAT the players can do
  • WHEN players move
  • HOW MUCH players get
5
Q

What is common knowledge?

A
  • everyone KNOWS the rules

- everyone KNOWS that everyone knows the rules