EBK PRINCIPLES OF MACROECONOMICS
6th Edition
ISBN: 9780073534701
Author: Frank
Publisher: YUZU
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Chapter 1, Problem 1.5CC
To determine
Explain the basketball assistant’s idea.
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Tom and Jerry are contestants on Jeopardy. Tom is leading with an accumulation of $12000, while Jerry trails closely at
$10000. In the final segment of the show, contestants must wager an amount not exceeding their current accumulation
that they will answer the last question of the night correctly. Wagers are made before the question is revealed. If the
contestant answers correctly, they have their wager added to their accumulation. Otherwise, it is deducted. Jerry is a game
show master and expects to answer correctly with 90% certainty. Tom is less experienced and only has a 55% chance.
Their utilities of wealth are given by uT (x) = x1 and u' (x)
50xi
a) How much should Tom wager to maximise his expected utility?
b) How much should Jerry wager to maximise his expected utility?
c) In expectation, how much money the expected winner of the show is going to win?
Game theory is a useful tool for analyzing
Situations in which multiple parties make decisions that do not affect each other.
Situations in which multiple parties make decisions with the potential to affect each other.
Situations in which multiple parties make decisions.
Situations in which one party makes a decision with the potential to affect other parties.
Any situation in which a decision must be made.
Game theory problem
Chapter 1 Solutions
EBK PRINCIPLES OF MACROECONOMICS
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