Ch12-Ucertainty-中级微观经济学.pptVIP

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. ? ? Diversification Two firms, A and B. Shares cost $10. With prob. 1/2 A’s profit is $100 and B’s profit is $20. With prob. 1/2 A’s profit is $20 and B’s profit is $100. You have $100 to invest. How? Diversification Buy only firm A’s stock? $100/10 = 10 shares. You earn $1000 with prob. 1/