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Probabilistic Risk Analysis and Game Theory

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  • Kjell Hausken

Abstract

The behavioral dimension matters in Probabilistic Risk Analysis (PRA) since players throughout a system incur costs to increase system reliability interpreted as a public good. Individual strategies at the subsystem level generally conflict with collective desires at the system level. Game theory, the natural tool to analyze individual‐collective conflicts that affect risk, is integrated into PRA. Conflicts arise in series, parallel, and summation systems over which player(s) prefer(s) to incur the cost of risk reduction. Frequently, the series, parallel, and summation systems correspond to the four most common games in game theory, i.e., the coordination game, the battle of the sexes and the chicken game, and prisoner's dilemma, respectively.

Suggested Citation

  • Kjell Hausken, 2002. "Probabilistic Risk Analysis and Game Theory," Risk Analysis, John Wiley & Sons, vol. 22(1), pages 17-27, February.
    • Handle: RePEc:wly:riskan:v:22:y:2002:i:1:p:17-27
    DOI: 10.1111/0272-4332.t01-1-00002
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