By I. B. Ibrahim, K. K. Seo and P. G. Vlachos (Eds.)
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Extra resources for Readings in Managerial Economics
Example text
2 means that there are three possible ways of looking at the figures as a whole; we illustrate with Fig. 2A as an example. 1. Figure 2A may be regarded as a lottery in which e and JC jointly determine a particular cell in the table and thus a particular consequence. Regarded in this way we shall call Fig. 2A a lottery on E xX with consequences as prizes. 2. Figure 2A may be regarded as a lottery in which e determines a column and JC determines a cell within the column. Regarded in this way we shall call Fig.
T Thus, one can conceive of a farm planning problem as a farmer game against Nature, in which all the crop and livestock enterprises and other farm activities are the farmer's resource use alternatives {A,}; and the states of Nature {S,} are the different possible price or weather conditions, etc. which might obtain in the planning period ahead. The payoff matrix [ c y ] then represents the whole set of possible returns (say, gross margins per acre) which might follow the adoption of any particular activity and the subsequent implementation of some particular state of Nature.
Regarded in this way we shall call Fig. 2A a lottery on E with lotteries on X as prizes. 3. Figure 2A may be regarded as a lottery in which JC determines a row and e determines a cell within the row. Regarded in this way we call Fig. 2A a lottery on X with lotteries on E as prizes. The reader must remember, however, that the second and third "aspects" which we have just defined do not imply that the value of one of the two "variables" is revealed to the decision maker after the other. 3. Notation for Lotteries The diagrams in Fig.