Chapter Twelve Uncertainty 不确定性
Chapter Twelve Uncertainty 不确定性
Structure State contingent consumption(依情 形而定的消费) Preferences under uncertainty Attitudes toward risk State-contingent budget constraint Choice under uncertainty Diversification and risk spreading
Structure State contingent consumption (依情 形而定的消费） Preferences under uncertainty Attitudes toward risk State-contingent budget constraint Choice under uncertainty Diversification and risk spreading
Uncertainty is Pervasive What is uncertain in economic systems? -tomorrow's prices -future wealth -future availability of commodities present and future actions of other people
Uncertainty is Pervasive What is uncertain in economic systems? – tomorrow’s prices – future wealth – future availability of commodities –present and future actions of other people
Uncertainty is Pervasive What are rational responses to uncertainty? -buying insurance (health,life,auto) -a portfolio of contingent consumption goods
Uncertainty is Pervasive What are rational responses to uncertainty? –buying insurance (health, life, auto) – a portfolio of contingent consumption goods
States of Nature Possible states of Nature: -“car accident''(a) -“no car accident'”(na). Accident occurs with probability xa, does not with probability Tha 兀a+兀na=1. Accident causes a loss of $L
States of Nature Possible states of Nature: – “car accident” (a) – “no car accident” (na). Accident occurs with probability a , does not with probability na ; a + na = 1. Accident causes a loss of $L
Contingencies A contract implemented only when a particular state of Nature occurs is state-contingent. E.g.the insurer pays only if there is an accident
Contingencies A contract implemented only when a particular state of Nature occurs is state-contingent. E.g. the insurer pays only if there is an accident
Contingencies A state-contingent consumption plan is implemented only when a particular state of Nature occurs. E.g.take a vacation only if there is no accident
Contingencies A state-contingent consumption plan is implemented only when a particular state of Nature occurs. E.g. take a vacation only if there is no accident
Preferences Under Uncertainty 2 states of nature: -At probability ta consumption is Ca -At probability Tna consumption is Cna -元a+兀na=1. Utility is U(ca,Cna,兀a,元na:
Preferences Under Uncertainty 2 states of nature: –At probability a , consumption is ca –At probability na , consumption is cna – a + na = 1. Utility is U(ca , cna, a , na)
Preferences Under Uncertainty Expected utility function Von-Neuman-Morgenstern utility function EU=πU(ca)+rnaU(ca） Positive affine transformation v(u)=au+b,a>0
Preferences Under Uncertainty EU U(c ) U(c ) = + a na a na Expected utility function Von-Neuman-Morgenstern utility function Positive affine transformation v(u)=au+b, a>0
Preferences Toward Risk Risk averse Risk neutral Risk loving
Preferences Toward Risk Risk averse Risk neutral Risk loving