北京大学：《中级微观经济学》课程教学资源（PPT课件讲稿，英文版）Chapter Twelve Uncertainty

Chapter twelve Uncertainty

Chapter Twelve Uncertainty

Structure State contingent consumption(依情 形而定的消费) State-contingent budget constraint Preferences under uncertainty Choice under uncertainty Risk aversion Diversification and risk spreading

Structure State contingent consumption (依情 形而定的消费） State-contingent budget constraint Preferences under uncertainty Choice under uncertainty Risk aversion 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 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