Journal Article Lemmas for a Theory of Approximate Optimal Growth Get access C. C. von Weizsäcker C. C. von Weizsäcker University of Heidelberg Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 34, Issue 1, January 1967, Pages 143–151, https://doi.org/10.2307/2296575 Published: 01 January 1967

The paper develops a new theory for the analysis of games with incomplete information where the players are uncertain about some important parameters of the game situation, such as the payoff functions, the strategies available to various players, the information other players have about the game, etc. However, each player has a subjective probability distribution over the alternative possibilities. In most of the paper it is assumed that these probability distributions entertained by the different players are mutually “consistent”, in the sense that they can be regarded as conditional probability distributions derived from a certain “basic probability distribution” over the parameters unknown to the various players. But later the theory is extended also to cases where the different players' subjective probability distributions fail to satisfy this consistency assumption. In cases where the consistency assumption holds, the original game can be replaced by a game where nature first conducts a lottery in accordance with the basic probability distribution, and the outcome of this lottery will decide which particular subgame will be played, i.e., what the actual values of the relevant parameters will be in the game. Yet, each player will receive only partial information about the outcome of the lottery, and about the values of these parameters. However, every player will know the “basic probability distribution” governing the lottery. Thus, technically, the resulting game will be a game with complete information. It is called the Bayes-equivalent of the original game. Part I of the paper describes the basic model and discusses various intuitive interpretations for the latter. Part II shows that the Nash equilibrium points of the Bayes-equivalent game yield “Bayesian equilibrium points” for the original game. Finally, Part III considers the main properties of the “basic probability distribution”.

Management science is concerning itself a great deal with decision theory at present. The latter provides a framework for the idealized, rational decision-maker. In actual fact, however, an executive's performance lies on a continuum between that of two people, one of whom makes rational and the other rationalized decisions. This article examines the role of the subconscious in executive decision-making and gives and discusses some extreme examples. Some controls are discussed on the vagaries of the decisions actually reached. The conclusion is that management science, and particularly decision theory, should concern itself far more with the effect of the subconscious on decisions. Some criteria for possible measurement are suggested.

Most businesses sell on credit. To administer credit, such companies set credit granting, term, and collection policies. This article analyzes one aspect of credit granting policy: the determination of the optimal number of credit applicants that should be accepted by a creditor. The emphasis in the relevant literature traditionally has been on techniques for estimating a credit applicant's probability of default and, to a lesser degree, on the decision to accept an applicant given his estimated probability of default. Cumulatively, these two decisions are crucial to any business selling on credit.

Abstract This article focuses on a study which showed the implicit assumptions in mix and yield variance analysis. A mix situation may exist whenever more than one direct material is specified as an input of the standardized operations. Mix variance can be described in two ways: (a) the sum of individual actual quantities times the individual standard unit prices less the sum of actual quantities at the weighted average standard price (based on standard quantities and mix) or (b) the sum of actual quantities times individual standard prices less the computed normalized mix quantities at individual standard prices. The normalized mix quantities are computed for each material by applying the standard proportions for each to the total actual inputs defined in quantity terms. A necessary condition then for the analysis of mix and yield variances, by the methods described, is the establishment of a common unit of measurement of the quantities of the different material inputs.

The poverty model, 40. — Farmers, 43. — Families with no one in the labor force, 44. — Education, 46. — Alaska and Hawaii, 47. — Full-time employment, 47. — Industrial structure, 48. — Nonwhites, 51. — Principal component analysis, 52. — Implications, 56.

The purpose of this note is to propose a method for initializing exponential smoothing forecasts when there are no data available prior to the series to be smoothed. It is primarily directed toward computer programs, but is not so involved as to rule out hand operations.

Additive utility formulations for risky and nonrisky multiple-factor decision situations are reviewed. Twenty-four methods of estimating additive utilities are listed and classified. References to the theory and technique of each method are given along with a short discussion of each. A number of examples are used to illustrate the methods.