Study on Extensive Game with Perfect Information by Considering Personal Risk Attitude  

Oleh:

Masruroh, Nur Aini ; Frankie

Jenis: Article from Proceeding
Dalam koleksi: Prosiding Seminar Nasional Teknik Industri Badan Kerjasama Penyelenggara Pendidikan Tinggi Teknik Industri (BKSTI) 2014: Bukittinggi, 2-4 September 2014, page 6: 18-24.
Topik: Extensive Game with Perfect Information; Decision Making; Expected Utility Theory; Prospect Theory; Decision Theory
Fulltext: 4. bksti7-606 (Nur Aini Masruroh, Frankie) 18-24.pdf (473.2KB)

Isi artikel

Decision making is an important process which people make in every situation. One important thing that needs to be considered in decision making study is the risk attitude of the decision maker toward a risky decision. Previous research shows that risk attitude of a person have an impact toward decision that will be made by that person. This research takes extensive game with perfect information by considering the risk attitude of the players as the main topic. An extensive game is the game with sequential structure of the decision problems encountered by the players in a strategic situation. Extensive game is considered to be important as many games are not simply ended in a stage, e.g. chess, optimal pricing in a supply chain stages, price-war in a monopoly market, and auction. Not many researches in an extensive game consider the risk attitude of decision maker as one of the factors in predicting the optimal strategy. This paper studies how the personal risk attitude may affect the decision in an extensive game. Two most well known theories, Expected Utility Theory and Prospect Theory, in decision making are used in this research. Both theories are used in predictingthe decisions that might be taken by a decision maker. This research finds that participants are having a risk-averse behavior toward gain case and risk seeking or loss averse toward loss case. This results similar to one of the main characteristics in Prospect Theory, loss aversion. The experiment also shows that there is no significant difference between using Expected Utility Theory and Prospect Theory to predict the respondents’ risk behavior at significance level 0.01 and 0.05.

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