第12章讲义 不确定性.pptVIP

“Unfair” Insurance Rational choice requires Since Hence for a risk-averter. “Unfair” Insurance Rational choice requires Since Hence for a risk-averter. I.e. a risk-averter buys less than full “unfair” insurance. 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. ? Uncertainty is Pervasive What are rational responses to uncertainty? buying insurance (health, life, auto) a portfolio of contingent consumption goods. ? ? Diversification (多样化） 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. 1/2 and $200 with prob. 1/2. Expected earning: $500 + $100 = $600 Diversification Buy only firm B’s stock? $100/10 = 10 shares. You earn $1000 with prob. 1/2 and $200 with prob. 1/2. Expected earning: $500 + $100 = $600 Diversification Buy 5 shares in each firm? You earn $600 for sure. Diversification has maintained expected earning and lowered risk. Diversification Buy 5 shares in each firm? You earn $600 for sure. Diversification has maintained expected earning and lowered risk. Typically, diversification lowers expected earnings in exchange for lowered risk. Risk Spreading/Mutual Insurance 100 persons each independently risk a $10,000 loss. Loss probability = 0.01. Initial wealth is $40,000. No insurance: expected wealth is Risk Spreading/Mutual Insurance Mutual insurance: Expected loss is Each of the 100 persons pays $100 into a mutual insurance fund. Mutual insurance: each person has a certain wealth of Risk-spreading benefits everyone. Choice Under Uncertainty Q: How