清华大学：《微观经济学》课程PPT教学课件（PPT讲稿）Chapter Twelve Uncertainty

Chapter twelve Uncertainty

Chapter Twelve Uncertainty

Main issue A state-contingent consumption plan Preferences Under Uncertainty and Expected utility Risk-aversion risk-loving and risk neutrality Competitive Insurance

Main Issue A state-contingent consumption plan Preferences Under Uncertainty and Expected utility Risk-aversion, risk-loving, and risk￾neutrality Competitive Insurance

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 n does not with probability Tna j a na Accident causes a loss of sl

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

State-Contingent Budget Constraints Each $1 of accident insurance costs y Consumer has sm of wealth. Cna is consumption value in the no accident state c is consumption value in the accident state

State-Contingent Budget Constraints Each $1 of accident insurance costs . Consumer has $m of wealth. Cna is consumption value in the no￾accident state. Ca is consumption value in the accident state

State-Contingent Budget Constraints

State-Contingent Budget Constraints Cna Ca

State-Contingent Budget Constraints A state-contingent consumption with $17 consumption value in the 20 accident state and $20 consumption value in the no-accident state 17

State-Contingent Budget Constraints Cna Ca 20 17 A state-contingent consumption with $17 consumption value in the accident state and $20 consumption value in the no-accident state