Question 1

Consider three gambles: $\mathrm{A}, \mathrm{B}$, and $\mathrm{C}$. Write out the Order Axiom using the " $>$ " notation.

Accepted Answer

The answer of Consider three gambles: $\mathrm{A}, \mathrm{B}$, and $\mathrm{C}$....

Question 2

The order axiom is to choices under uncertainty as rationality is to choices under certainty.

Accepted Answer

A) True 
 B)False

Question 3

Consider two possible outcomes, $\mathrm{a}$ and $\mathrm{b}$ and a utility function over these two outcomes $U(a, b)$. What must be true about $U(a, b)$ if the utility function is skew-symmetric?

Accepted Answer

The answer of Consider two possible outcomes, $\mathrm{a}$ and $\mathrm{b}$...

Question 4

Decisions under risk have two components: preferences over outcomes and perceptions of probabilities.

Accepted Answer

A) True 
 B)False

Question 5

When trying to forecast the weather, a forecaster's situation is best described as Knightian risk.

Accepted Answer

A) True 
 B)False

Question 6

Ambiguity aversion occurs when individuals show a preference for gambles in which the outcome and the probabilities are known over those gambles for which they are unknown.

Accepted Answer

A) True 
 B)False

Question 7

A decision-maker has more information under Knightian risk than Knightian uncertainty.

Accepted Answer

A) True 
 B)False

Question 8

The heart of Bernoulli's solution to the Saint Petersburg paradox is

Accepted Answer

A)  Convexity of the utility function. 
B)  Violation of transitivity of preferences. 
C)  Violation of the independence axiom. 
D)  Risk aversion.

Question 9

Consider the three gambles presented in Table 9.1. What are the three conditions implied by regret aversion?

Accepted Answer

The answer of Consider the three gambles presented in Table...

Question 10

The common outcome effect is an example of the violation of the independence Axiom.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following scenarios describe a situation in which ambiguity is present?

Accepted Answer

A)  The probabilities are known and the set of outcomes are known. 
B)  The probabilities are known and the outcome is known. 
C)  The probabilities are unknown and the outcome is known. 
D)  The probabilities are unknown and the set of outcomes are known.

Exam 9: Decision Under Risk and Uncertainty

Consider three gambles: $\mathrm{A}, \mathrm{B}$ , and $\mathrm{C}$ . Write out the Order Axiom using the " $>$ " notation.

The order axiom is to choices under uncertainty as rationality is to choices under certainty.

Consider two possible outcomes, $\mathrm{a}$ and $\mathrm{b}$ and a utility function over these two outcomes $U(a, b)$ . What must be true about $U(a, b)$ if the utility function is skew-symmetric?

Decisions under risk have two components: preferences over outcomes and perceptions of probabilities.

When trying to forecast the weather, a forecaster's situation is best described as Knightian risk.

Ambiguity aversion occurs when individuals show a preference for gambles in which the outcome and the probabilities are known over those gambles for which they are unknown.

A decision-maker has more information under Knightian risk than Knightian uncertainty.

The heart of Bernoulli's solution to the Saint Petersburg paradox is

Consider the three gambles presented in Table 9.1. What are the three conditions implied by regret aversion?

The common outcome effect is an example of the violation of the independence Axiom.

Which of the following scenarios describe a situation in which ambiguity is present?

Exam 9: Decision Under Risk and Uncertainty

Consider three gambles: A,B\mathrm{A}, \mathrm{B}A,B , and C\mathrm{C}C . Write out the Order Axiom using the " >>> " notation.

The order axiom is to choices under uncertainty as rationality is to choices under certainty.

Consider two possible outcomes, a\mathrm{a}a and b\mathrm{b}b and a utility function over these two outcomes U(a,b)U(a, b)U(a,b) . What must be true about U(a,b)U(a, b)U(a,b) if the utility function is skew-symmetric?

Decisions under risk have two components: preferences over outcomes and perceptions of probabilities.

When trying to forecast the weather, a forecaster's situation is best described as Knightian risk.

Ambiguity aversion occurs when individuals show a preference for gambles in which the outcome and the probabilities are known over those gambles for which they are unknown.

A decision-maker has more information under Knightian risk than Knightian uncertainty.

The heart of Bernoulli's solution to the Saint Petersburg paradox is

Consider the three gambles presented in Table 9.1. What are the three conditions implied by regret aversion?

The common outcome effect is an example of the violation of the independence Axiom.

Which of the following scenarios describe a situation in which ambiguity is present?

Consider three gambles: $\mathrm{A}, \mathrm{B}$ , and $\mathrm{C}$ . Write out the Order Axiom using the " $>$ " notation.

Consider two possible outcomes, $\mathrm{a}$ and $\mathrm{b}$ and a utility function over these two outcomes $U(a, b)$ . What must be true about $U(a, b)$ if the utility function is skew-symmetric?