Ch12Uncertainty(中级微观经济学-清华大学,钟笑寒).pptVIP

Chapter Twelve Uncertainty 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. Contingent Consumption Q: What is the consumption bundle that is being chosen under uncertainty? A: Contingent consumption plan. A specification of what will be consumed in each different state of nature. Contingent: dependent on something uncertain or in the future. Contingent Consumption (State-)contingent consumption plan State of nature: Different realizations (events) of some random variables. The specification of a contingent consumption plan tells us the probability distribution of different states of nature. What will be consumed (in different states). Usually a consumption bundle (in our previous sense). A simplified form is the monetary gamble. 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. Contingencies A state-contingent consumption plan is implemented only when a particular state of Nature occurs. E.g. Suffer from loss only if there is an accident. Contingencies Your original contingent consumption plan can be changed by trading for a contingent contract, e.g. an insurance contract. 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. State-Contingent Budget Constraints 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 Accident causes a loss of $L. Without insurance, Ca = m - L Cna = m. State-Contingent Budget Constraints State-Contingent Budget Constraints State-Cont