Solution

ID: past-exam-of-the-msc-in-advanced-computer-science-course-of-the-university-of-oxford/2023/computational-game-theory/1/a/solution

Under the expected utility hypothesis, use positive affine uniqueness of affine preference representations to normalize the extreme outcomes to and . The stated indifference relations then give
The two lotteries have expected utilities
Hence , with normalized expected utility difference . Equivalently, substitution reduces them to lotteries with probabilities and of the better extreme outcome. The inference uses the independence axiom for lottery preferences; the three displayed outcome comparisons alone would not determine preferences over all compound lotteries without the expected utility hypothesis.

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