POL-UA 700 Lecture Notes - Lecture 14: Risk Premium, Strategy (Game Theory), Bayes Estimator
14 Dec 2016
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Solving for the p that makes player 2 indifferent. P (0. 5) + (1-p) (0) = p (0) + (1 - p) (1) Q (1) + (1 - q) (0) = q (0) + (1 - q) (0. 5) Gambling versus sure-shots a. b. c. d. e. f. If you prefer the sure shot then you are risk-averse. The amount of money when provided as a sure shot gives you the same utility as the expected payoff from a gamble. Then there is an amount of sure shot payoff less than 5 that gives you the same utility as 5 from gamble (certainty equivalent) What should incumbent do if offering < ce. Assuming single peaked preferences and single issue continuum and majority support required to win election, preference of median voter will be the winning position. Protest or cooperate, post-2016 election a. b. c. We constantly re-evaluate/update p, based on the candidate"s behavior.
