Q2. Preferences and utility Let's assume that country A prefers not to make additional concessions (outcome C1) to country B than granting those concessions (outcome C2), but a continued war (outcome C3) would be worse than making the additional concessions (C2). The following utility function over the outcomes specifies the intensity of preferences for country A over the outcomes: u(C1) = 1, u(C2) = 0.3, and u(C3) = 0. Country A can choose to refuse concessions (action A1) or allow concessions (action A2). The outcome that will occur is a function of the "type" of country B's leader. If country A refuses concession (A1), country B will not initiate a war (outcome C1) if country B's leader is amicable, while it will enter a war (outcome C3) if the leader is belligerent. There is a probability p(S1) = 0.6 that country B's leader is amicable and a probability p(S2) = 0.4 that country he's belligerent. If country A allows concession (A2), both in case of country A is amicable p(S1) and belligerent p(s2), outcome (C2) is realized. Q3. What is the expected utility of action A1? EU(A1)=0.30 EU(A1)=0.40 EU(A1)=0.60 EU(A1)=0.70 EU(A1)=0.72 Q2. Preferences and utility Let's assume that country A prefers not to make additional concessions (outcome C1) to country B than granting those concessions (outcome C2), but a continued war (outcome C3) would be worse than making the additional concessions (C2). The following utility function over the outcomes specifies the intensity of preferences for country A over the outcomes: u(C1) = 1, u(C2) = 0.3, and u(C3) = 0. Country A can choose to refuse concessions (action A1) or allow concessions (action A2). The outcome that will occur is a function of the "type" of country B's leader. If country A refuses concession (A1), country B will not initiate a war (outcome C1) if country B's leader is amicable, while it will enter a war (outcome C3) if the leader is belligerent. There is a probability p(S1) = 0.6 that country B's leader is amicable and a probability p(S2) = 0.4 that country he's belligerent. If country A allows concession (A2), both in case of country A is amicable p(S1) and belligerent p(s2), outcome (C2) is realized. Q3. What is the expected utility of action A1? EU(A1)=0.30 EU(A1)=0.40 EU(A1)=0.60 EU(A1)=0.70 EU(A1)=0.72 Q4. What is the expected utility of action A2? EU(A2)=0.30 EU(A2)=0.40 EU(A2)=0.60 EU(A2)=0.70 EU(A2)=0.72 Q5. What action should country A choose? Action A1 Action A2 Q6. What action should country A choose if u(C2) were equal to 0.5 rather than 0.3? Action A1 Action A2 Q7. What action should country A choose if u(C2) were equal to 0.3 but p(S1) were equal to 0.25 (and p(S2) = 0.75)? Action A1 Action A2

Q2. Preferences and utility Let's assume that country A prefers not to make additional concessions (outcome C1) to country B than granting those concessions (outcome C2), but a continued war (outcome C3) would be worse than making the additional concessions (C2). The following utility function over the outcomes specifies the intensity of preferences for country A over the outcomes: u(C1) = 1, u(C2) = 0.3, and u(C3) = 0. Country A can choose to refuse concessions (action A1) or allow concessions (action A2). The outcome that will occur is a function of the "type" of country B's leader. If country A refuses concession (A1), country B will not initiate a war (outcome C1) if country B's leader is amicable, while it will enter a war (outcome C3) if the leader is belligerent. There is a probability p(S1) = 0.6 that country B's leader is amicable and a probability p(S2) = 0.4 that country he's belligerent. If country A allows concession (A2), both in case of country A is amicable p(S1) and belligerent p(s2), outcome (C2) is realized. Q3. What is the expected utility of action A1? EU(A1)=0.30 EU(A1)=0.40 EU(A1)=0.60 EU(A1)=0.70 EU(A1)=0.72 Q2. Preferences and utility Let's assume that country A prefers not to make additional concessions (outcome C1) to country B than granting those concessions (outcome C2), but a continued war (outcome C3) would be worse than making the additional concessions (C2). The following utility function over the outcomes specifies the intensity of preferences for country A over the outcomes: u(C1) = 1, u(C2) = 0.3, and u(C3) = 0. Country A can choose to refuse concessions (action A1) or allow concessions (action A2). The outcome that will occur is a function of the "type" of country B's leader. If country A refuses concession (A1), country B will not initiate a war (outcome C1) if country B's leader is amicable, while it will enter a war (outcome C3) if the leader is belligerent. There is a probability p(S1) = 0.6 that country B's leader is amicable and a probability p(S2) = 0.4 that country he's belligerent. If country A allows concession (A2), both in case of country A is amicable p(S1) and belligerent p(s2), outcome (C2) is realized. Q3. What is the expected utility of action A1? EU(A1)=0.30 EU(A1)=0.40 EU(A1)=0.60 EU(A1)=0.70 EU(A1)=0.72 Q4. What is the expected utility of action A2? EU(A2)=0.30 EU(A2)=0.40 EU(A2)=0.60 EU(A2)=0.70 EU(A2)=0.72 Q5. What action should country A choose? Action A1 Action A2 Q6. What action should country A choose if u(C2) were equal to 0.5 rather than 0.3? Action A1 Action A2 Q7. What action should country A choose if u(C2) were equal to 0.3 but p(S1) were equal to 0.25 (and p(S2) = 0.75)? Action A1 Action A2

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Question

100%

Q2.

Preferences and utility

Let's assume that country A prefers not to make additional concessions (outcome C1) to country B than granting those concessions (outcome C2), but a continued war (outcome C3) would be worse than making the additional concessions (C2). The following utility function over the outcomes specifies the intensity of preferences for country A over the outcomes: u(C1) = 1, u(C2) = 0.3, and u(C3) = 0.

Country A can choose to refuse concessions (action A1) or allow concessions (action A2). The outcome that will occur is a function of the "type" of country B's leader.

If country A refuses concession (A1), country B will not initiate a war (outcome C1) if country B's leader is amicable, while it will enter a war (outcome C3) if the leader is belligerent. There is a probability p(S1) = 0.6 that country B's leader is amicable and a probability p(S2) = 0.4 that country he's belligerent.

If country A allows concession (A2), both in case of country A is amicable p(S1) and belligerent p(s2), outcome (C2) is realized.

Q3.

What is the expected utility of action A1?

EU(A1)=0.30
EU(A1)=0.40
EU(A1)=0.60
EU(A1)=0.70
EU(A1)=0.72

Q2.

Q3.

What is the expected utility of action A1?

EU(A1)=0.30
EU(A1)=0.40
EU(A1)=0.60
EU(A1)=0.70
EU(A1)=0.72

Q4. What is the expected utility of action A2?

EU(A2)=0.30
EU(A2)=0.40
EU(A2)=0.60
EU(A2)=0.70
EU(A2)=0.72

Q5.

What action should country A choose?

Action A1
Action A2

Q6.

What action should country A choose if u(C2) were equal to 0.5 rather than 0.3?

Action A1
Action A2

Q7.

What action should country A choose if u(C2) were equal to 0.3 but p(S1) were equal to 0.25 (and p(S2) = 0.75)?

Action A1
Action A2

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.