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» Economics » Decision theory » Topics begins with R » Risk dominance

Page modified: Tuesday, July 12, 2011 23:17:10

Term from the game theory. If a play is not clearly solvable, because there is no clear equilibrium, different possibilities are possible (see approaches (game theory)). One of it is the risk dominance, which examines, which equilibrium to few is risky.

As example the following play: Players 2 L R player 1 U 9.9,0.8 D of 8.0,7.7 as Nash equilibrium surrender (U, L) and (D, R). While (U, L) results in a yield of 9 for both players and therefore Pareto dominant is, (D, R) the risk dominant factor is solution.

For the following reason: If player selects 1 U, in order the equilibrium (U, L) to reach, he can lose 9 points of yield, if player 2 focuses the equilibrium (D, R). If player selects 1 however D to reach around the equilibrium (D, R) and the other player plays L for (U, L), he can obtain even one point of yield more. Thus contain the equilibrium (D, R) fewer risks and is risikodominant.

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» Risk dominance
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