Author Question: In the Prisoners' Dilemma game: a. When the prisoners follow their dominant strategy and confess, ... (Read 114 times)

mwit1967 · **on:** Jun 30, 2018

In the Prisoners' Dilemma game:
a. When the prisoners follow their dominant strategy and confess, both will be better off than if both had remained silent.
b. a player would be better off if he did not confess and the other player confessed.
c. a player would be better off if he confessed when the other player also confessed, but not if the other player did not confess.
d. None of the above is true.

Question 2

How is the utility of a gamble to a risk averse person different from that to a risk neutral person?

diesoon · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

d

Answer to Question 2

For a risk averse person the expected utility derived from the wealth invested in a gamble is always lower than the actual utility derived from the wealth. He would be ready to pay someone to take the gamble away from him. On the other hand, a risk neutral person is indifferent between taking or avoiding a gamble with a zero expected return.