Suppose Xavier has tickets to the Super Bowl, but is terribly ill with a noncontagious infection. How would a decision maker perform his economic calculation on whether to attend the game, based on the traditional model of risk behavior?
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Suppose Xavier has tickets to the Super Bowl, but is terribly ill with a noncontagious infection. How would a decision maker perform his economic calculation on whether to attend the game, based on the traditional model of risk behavior?
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- Consider the game between CrossTalk vs GlobalDialog in the attached file. The number of pure strategies of CrossTalk is Blank 1. Fill in the blank, read surrounding text. , and the number of pure strategies of GlobalDialog is Blank 2. Please answer Blank1 and 2 GlobalDialog 14 High Don't Invest 1 GlobalDialog Don't 0,0 0,- Low 6. Invest -,0 GlobalDialog 2 1 High Low 14 High High 2,2 -10,6 CrossTalk Low Low 6, –10 -2,–2 6. CrossTalk CrossTalkWhen a famous painting becomes available for sale, it is often known which museum or collector will be the likely winner. Yet, the auctioneer actively woos representatives of other museums that have no chance of winning to attend anyway. Suppose a piece of art has recently become available for sale and will be auctioned off to the highest bidder, with the winner paying an amount equal to the second highest bid. Assume that most collectors know that Yakov places a value of $35,000 on the art piece and that he values this art piece more than any other collector. Suppose that if no one else shows up, Yakov simply bids $35,0002=$17,500 $35,000 2 = $17,500 and wins the piece of art. The expected price paid by Yakov, with no other bidders present, is. Suppose the owner of the artwork manages to recruit another bidder, Bob, to the auction. Bob is known to value the art piece at $28,000. The expected price paid by Yakov, given the presence of the second bidder Bob, is.1. Now, imagine that Port Chester decides to crack down on motorists who park illegally by increasing the number of officers issuing parking tickets (thus, raising the probability of a ticket). If the cost of a ticket is $100, and the opportunity cost for the average driver of searching for parking is $12, which of the following probabilities would make the average person stop parking illegally? Assume that people will not park illegally if the expected value of doing so is negative. Check all that apply. A. 9% B. 18% C. 17% D. 10% 2. Alternatively, the city could hold the number of officers constant and discourage parking violations by raising the fine for illegal parking. Suppose the average probability of getting caught for parking illegally is currently 10% citywide, and the average opportunity cost of parking is, again, $12. The fine that would make the average person indifferent between searching for parking and parking illegally is ____ , assuming that people will not…
- In a large casino, the house wins on its blackjack tables with a probability of 50.9%. All bets at blackjack are 1 to 1, which means that if you win, you gain the amount you bet, and if you lose, you lose the amount you bet. a. If you bet $1 on each hand, what is the expected value to you of a single game? What is the house edge? b. If you played 150 games of blackjack in an evening, betting $1 on each hand, how much should you expect to win or lose? c. If you played 150 games of blackjack in an evening, betting $3 on each hand, how much should you expect to win or lose? d. If patrons bet $7,000,000 on blackjack in one evening, how much should the casino expect to earn? a. The expected value to you of a single game is $ (Type an integer or a decimal.)In 'the dictator' game, one player (the dictator) chooses how to divide a pot of $10 between herself and another player (the recipient). The recipient does not have an opportunity to reject the proposed distribution. As such, if the dictator only cares about how much money she makes, she should keep all $10 for herself and give the recipient nothing. However, when economists conduct experiments with the dictator game, they find that dictators often offer strictly positive amounts to the recipients. Are dictators behaving irrationally in these experiments? Whether you think they are or not, your response should try to provide an explanation for the behavior.You're a contestant on a TV game show. In the final round of the game, if contestants answer a question correctly, they will increase their current winnings of $3 million to $4 million. If they are wrong, their prize is decreased to $2,250,000. You believe you have a 25% chance of answering the question correctly. Ignoring your current winnings, your expected payoff from playing the final round of the game show is. Given that this is ______________ (POSITIVE/NEGATIVE), you___________ (SHOULD/ SHOULD NOT) play the final round of the game. (Hint: Enter a negative sign if the expected payoff is negative.) The lowest probability of a correct guess that would make the guessing in the final round profitable (in expected value) is (Hint: At what probability does playing the final round yield an expected value of zero?)
- Suppose there are two criminals who are thinking about robbing either an insurance company or a liquor store. The take from the insurance company robbery would be Gh50,000 each, but the job requires two people (one to do the robbing and one to drive the getaway car). The take from robing a liquor store is only $1000 but can be done with one person acting alone or both. What are the strategies of these players (the two criminals)? b. Write this situation in a normal game form assuming they are acting simultaneously. What are the equilibria for this game? (Note: Both Pure strategy and Mixed strategy) а. с.1.a) If the three executives of a fraudulent organization report nothing to the authorities, each gets a payoff of 100. If at least one of them blows the whistle, then those who reported the fraud get 28, while those who didn’t get -100. Suppose they play a symmetric mixed-strategy Nash equilibrium where each is silent (does not report fraud) with probability p. What is p?A, 0.1B, 0.28C, 0.5D, 0.8 b) In a two-player game, with strategies and (some known and some unknown) payoffs as shown below, suppose a mixed-strategy equilibrium exists where 1 plays C with probability 3/4, and Player 2 randomizes over X, Y, and Z with equal probabilities. What are the pure-strategy equilibria of this game? A, (A, Y) and (B, X)B, (A, Z) and (C, Y)C, (B, X) and (C, X)D, (C, X) and (C, Y)Shane just bought a house worth $360,000 in an area that is known for floods. A flood occurs with a 5% chance and if it occurs, his home is ✓ for reduced in value to $202,500. Shane has utility function given by U(X)=√√X. He would be willing to pay a maximum of flood insurance. The fair insurance premium for flood insurance is Shane's risk premium is Suppose, instead, that Shane's utility function is given by U(X) = X². Then, the maximum he would be willing to pay for flood insurance is
- Exercise 5: Insurance Consider two individuals, Dave and Eva. Both Dave and Eva have initial wealth 810,000 and face a 40% chance of losing L = 450, 000. Dave has von Neumann-Morgenstern utility function up(x) = x and Eva has von Neumann-Morgenstern utility function ug (x) = VT. 1. What do you know about Dave's and Eva's risk preferences? 2. What is the most Dave would be willing to pay for complete insurance against the loss? 3. What is the most Eva would be willing to pay for complete insurance against the loss? Suppose they are each able choose insurance with any coverage level z [0, 1] (i.e. 0 0. 6. Is Eva's optimal choice full insurance, i.e. z = 1?Suppose that • The employee has an outside offer to work for $27 per hour, for 1500 hours per year The employee currently works for $20 per hour, for 2000 hours per year The switching cost can be either high ($1'000) or low ($50) • The high switching cost has probability 40%; the low switching cost 60% Suppose that the cost of losing the employee is $800. What is the employer expected payoff from choosing not to match the outside offer?9. Problems and Applications Q9 Dmitri has a utility function U = W, where W is his wealth in millions of dollars and U is the utility he obtains from that wealth. In the final stage of a game show, the host offers Dmitri a choice between (A) $4 million for sure, or (B) a gamble that pays $1 million with probability 0.4 and $9 million with probability 0.6. Use the blue curve (circle points) to graph Dmitri's utility function at wealth levels of $0, $1 million, $4 million, $9 million, and $16 million. Utility (Thousands) 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0 0 2 4 8 6 10 12 14 Wealth (Millions of dollars) 16 18 20 V Utility Function ?