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What does the utlility function for a risk taker show?

An increasing marginal return for money.

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What does the utlility function for a risk avoider show?

A diminishing marginal return for money.

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What property do all utility functions posess?

More money leads to more utility

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decision analysis

a single decision maker seeks to select an optimal decision alternative after considering the possible outcomes of one or more chance events.

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game theory

two or more decision makers are called players, and they compete as adversaries against each other. Each player selects a strategy independently without knowing in advance the strategy of the other player or players. The combination of the competing strategies provides the value of the game to the players.

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saddle point

Whenever the maximum of the row minimums equals the minimum of the column maximums, the players cannot improve their outcomes by changing strategies.

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pure strategy

Maximum(Row minimums) = Minimum(Column maximums) - optimal for both players.

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Optimal solution for mixed strategy

optimal solution for each player is to randomly select among the alternative strategies.

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A dominated strategy exists if

another strategy is at least as good regardless of what the opponent does.

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two-person, constant-sum game

occurs when the payoffs for the strategies chosen sum to a constant other than zero.

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