“There are many types of games, board games, card games, video games, field games (football and so on), etc. We focus on games where There are two or more players, where some sort of strategy matters, the game has one or more outcomes (someone wins, someone loses), and where strategic interaction applies in the outcome of winning. This leaves out games of pure chance (lotteries, slot machines), in which strategy doesn’t apply. This also leaves out games without strategic interaction, like solitaire.” “The Game Theory is a branch of applied mathematics that is for analyzing situations were people, or players, make interdependent decisions. The fact that everyone’s decision depends on the other players, means that each player has to consider the other player’s possible decisions or strategies when thinking of his own. The solution to a game describes the many decision of the players who can have similar, opposed, or opposite interests, and the outcomes that might result from the decisions the players have made.” “The Game Theory was referred to as "the study of mathematical models of conflict and cooperation between intelligent rational decision-makers." The game Theory is used in many fields besides mathematics. It is also used in economics, political science, psychology, logic, and biology. For example, the Game Theory was used understand a large collection of economic behaviors, including behaviors of firms, markets, and consumers. Since those studies, the Game Theory has expanded in the social studies field. It’s been applied to political, sociological, and psychological behaviors as well. “ I’ve come to find, that the game theory is much bigger then applied mathematics. Above, in the quoted paragraphs, are basic and mathematical concepts of the game theory. The game theory I chose to concentrate on is more on the social studies field. Saying that, upon my research I found that economists call it game theory; psychologists call it the theory of social...

...SYMBOLIC SYSTEMS 202: The Rationality Debate (3 units) Winter Quarter 2003-2004, Stanford University Instructor: Todd Davies
GameTheory Through Examples (2/11/04)
Games against nature - decision theory for a single agent
Expected utility theory for a single agent is sometimes called the theory of "games against nature". Consider this example.
Example 1: Planning a party
Our agent is planning a party, and is worried about whether it will rain or not. The utilities and probabilities for each state and action can be represented as follows:
| | |Nature's states: | |
| | |Rain |No rain |
| | |(p=1/3) |(~p=2/3) |
|Party planner's possible actions: |Outside |1 |3 |
|...

...what extent gametheory is a helpful approach to the financial markets
Gametheory is the science that mathematically captures the behaviour of agents (humans, nations or animals) in strategic situations (when the individual success depends on the choices of others players). Before it, election choice was framed in the idea of individual election without interaction among agents, situation that biased social sciences’ analysis because in many cases, one agents’ response reflects not only his or her preferences, but also preferences of other agents in the “game” (Owen, 2008). In this sense, gametheory brought to social sciences tools to realistically analyse interactions among individuals. It was initially introduced by von Neumann and Morgenstern in 1944 and Nash in 1950, and since then, it has been increasingly used not only in economics, but also in computer science, engineering, biology, political science, international relations and even philosophy. Financial markets have been not isolated of the influence of gametheory: it has affected theory foundations, market analysis and trading methods. Indeed, its influence has been so important that The Economist (1996) said that “managers have much to learn from gametheory — provided they use it to clarify their thinking”; in a similar vein The Wall Street...

...Decision Theory Models
The Six Steps in Decision Theory
* Clearly define the problem at hand.
* List the possible alternatives.
* Identify the possible outcomes or states of nature.
* List the payoff or profit of each combination of alternatives and outcomes.
* Select one of the mathematical decision theory models.
* Apply the model and make your decision.
Case
Here we use the Thompson Lumber Company case as an example to illustrate these decision theory steps. John Thompson is the founder and president of Thompson Lumber Company, a profitable firm located in Portland, Oregon.
Step 1
The problem that John Thompson identifies is whether to expand his product line by manufacturing and marketing a new product, backyard storage sheds.
Step 2
* The second step is to list the alternative.
* Thompson’s second step is to generate alternatives that are available to him .In decision theory the alternative is a course of action or strategy that the decision maker can choose .According to him his alternatives are to construct:
1 • a large new plant to manufacture the storage sheds
2 • a small plant, or
3 • no plant at all
* So, the decision makers should try to make all possible alternatives ,on some occasion even the least important alternative might turn out to be the best choice.
Step 3
* Third step is to identify possible outcomes....

...necessary to trade off these two desirable characteristics, NI does not exist as a well-defined economic construct
Module 2: Decision usefulness approach to financial reporting
Decision Usefulness Approach - theory of investor decision making in order to infer the nature and types of information that investors need.
PV Model (doesn’t work well in practice)
Single Person Decision theory (concept of utility, investor maximizing his/her return; prior & posterior probabilities; Bayes Theorem)
Information System (conditional probabilities; main & off main diagonals; progression of GN/BN -> future expected earnings -> future expected returns; positive relationship b/w F/S & payoffs)
Rational Risk Averse Investor (risk averse, chooses highest expected utility)
Principle of Portfolio Diversification (trade-off b/w risk and expected return; firm specific & market wide factors, beta risk)
Optimal Investment decisions (including / ignoring transaction costs)
Beta Risk (covariance calc, portfolio expected value & variance)
Decision Usefulness approach & standard setting bodies (primary user groups, characteristics of information required)
Mod 3 Efficient Securities Market
Efficient Securities Market (semi strong form, relative concept, fair game, random walk)
Market Prices reflecting all available information (Beaver study -consensus forecast, rational expectations)
Beaver’s arguments -...

...Expected Utility Theory
and Risk Aversion
Seminar Paper
1
Contents
S.no.
Topic
Page No.
1.
Acknowledgment
2
2.
Introduction
3
3.
Is this theory Empirically true?
8
4.
5.
How do different people with different levels of risk
aversion behave, under the EUT?
Major Criticism: Coherence of Large & Small Stake
gambles
13
16
6.
Conclusion
20
7.
References
21
2
Acknowledgement
I would like to thank Mr. because without his constant guidance and support this
paper would not have been possible. His timely feedback and valuable inputs kept me on the
right path to complete this paper.
I would also like to take this opportunity to thank University who provided me with the
required facilities and reading material which greatly helped in completing this paper.
I would also like to thank my family and friends who always pushed me and motivated me to
work hard whenever I lost all hopes of completing this paper on time.
All in all, it was a wonderful and enriching experience completing this paper.
3
2.
Introduction
Expected Utility Theory (EUT) states that the decision maker (DM) chooses between risky or
uncertain prospects by comparing their expected utility values, i.e., the weighted sums
obtained by adding the utility values of outcomes multiplied by their respective probabilities.
In economics, game...

...Lecture 1 – Normative Decision Theory
What is a decision?
Difficult to provide a general definition
Yates, Veinott & Patalana (2003): A decisions is a commitment to a course of action that is intended to produce a satisfying state of affairs
Better to identify components of a decision situation
Choice between actions (and also inaction)
Usually Goal Orientated – the action is taken to produce favorable outcomes
Requires people to evaluate possible outcomes
However, there are many more features than this that differentiate decisions situations
Other Common Typologies
Strategic, Tactical, Operational Decisions
Strategic: Involve the general direction taken by an individual or organization, often determine how decisions that follow should be taken, they often take some time to make and involve outcomes that occur in the long term
Tactical: Decisions involve the implementation of strategy and represent the stream of smaller scale decisions that usually take a shorter time to make and associated with outcomes that occur in the shorter term
Operational: Involve the day-to-day decisions making needed to execute plans and tactics.
In organizations senior managers tend to make the strategic decisions and more junior managers the tactical and operational decisions
Structured and Unstructured Decisions
Unstructured: Occur when there is a general understanding of the need to act, but no clear idea about what the relevant goals/objectives are, the alternative...

...The researcher wants to know the effects of playing online games on the academic performances of the students in Mt. Moriah Christian Academy. The reason why the researcher have chosen this particular research topic was know the advantages and disadvantages of playing computer games on the academic performances of the selected high school students. The researcher aims to know how many high school students were addicted on playing online games. Some of the tasks of the researcher has to complete in order to attain the aims of the research paper were to do suveys within the MMCA, to know if the playing online games bring good or bad effects to the academic performances of the high school students. Some of the researcher intents were to help also some students when this research is already finished or done.
B. Background of the Study
Online gaming is a technology rather than a genre; a mechanism for connecting players together rather than a particular pattern of game play. Online games are played over some form of computer network, now typically on the Internet. Some of the advantages of playing online games are; the ability to connect to multiplayer games, although single-player online games are quite common as well, and the ability to build the confidence of the individual in the game that they’re used to play. Some of the...

...Beauty Contest Experiment
The experiment executed in the seminar was very simple. Players had to choose a number between 0 and 100. The objective is to choose a number based on your guess of the mean guesses of the group and multiply it by 2/3. It is called the Beauty contest Experiment because it was based on a theory John Maynard Keynes proposed on the relationship of the stock market with beauty contests conducted in newspapers of his time. In this report I will examine the logic behind choosing the best response strategy in theory and compare it with the actual results of the experiment conducted. From the comparison I will provide justification for why the theory is different from reality by also comparing it to examples in real life.
To understand the underlying logic of the game’s strategy one must understand the Nash Equilibrium. Princeton University’s Website (an excellent source since John Nash the person who came up with the Equilibrium attended that university) defines Nash Equilibrium as “a solution concept of a game involving two or more players, in which each player is assumed to know the equilibrium strategies of the other players, and no player has anything to gain by changing only his or her own strategy unilaterally. If each player has chosen a strategy and no player can benefit by changing his or her strategy while the other players keep theirs unchanged, then the current set of strategy choices...