Question

18. The Axiom of Closure prevents what pathology of decision making? A. Violation of the "sure thing" principle B. Becoming a "money pump C. Inability to make choices under risk D. Obsession with infinitely improbable alternatives E. Neglecting base rates 19. Consider the following simultaneous game (payoff pairs (a, b) indicate the payoffs to Player 1 (a) and Player 2 (b), respectively) Player 1 R. Player 2 L (2,-2) (0,2) R (2,0) (0,0) What is the best response of Player 2 to a play of L by Player 1? A. L C. L and R are both best responses D. Neither L nor R are best responses E. Cannot determine without additional information

Answer 1

18.

Axiom of closure represents the closed property of the choice set. This means that we exclude infinite improbable alternatives to be considered in our choice set.

Correct Ans - D

19.

If player 1 plays L, best response for player 2 is R which gives a payoff of 0 compared to -2 received by playing L.

Correct Ans - B

20.

A dominant strategy is the one which gives at least the same payoff as compared to any other strategy no whatever what the opponent does.

Correct Ans - C

21.

"Extraordinary claims require extraordinary evidence" means according to the French mathematician Laplace that: "The weight of evidence for an extraordinary claim must be proportioned to its strangeness." This can be quantified in probability theory using Bayes rule.

Correct Ans - C