24 Decisions Involving Uncertainty

These flashcards cover key vocabulary terms related to decision-making under uncertainty, probability, and game theory.

First-mover advantage

A gain from choosing first in a game or competitive scenario.

Expected Value

The calculated average outcome of a gamble, considering the probabilities and payoffs of various outcomes.

Risk Aversion

The dislike or avoidance of uncertainty and preference for certain outcomes over uncertain ones.

Nash Equilibrium

An outcome in a game where each player makes the best choice given the choices of other players.

Diminishing Marginal Utility

The principle that as a person consumes more of a good or service, the additional satisfaction (utility) gained from consuming an extra unit typically decreases.

Fair Bet

A gamble that, on average, leaves you with the same amount of money; its expected gains are 0.

Sequential Games

Games where players take turns making decisions, as opposed to making them simultaneously.

Utility Maximization

The process of making choices to achieve the highest level of satisfaction or benefit.

Risk-Loving Behavior

A tendency to prefer uncertain gains over certain ones, often reflected in willingness to take risks.

Expected Utility

A measure of the satisfaction derived from an outcome considering the probability of that outcome.