A Ratio Criterion for Signing the Effects of an Increase in Uncertainty
AbstractA decisionmaker wishes to pick b to maximize E[u(z(x,b))] where x is a random variable. A shift in the probability density function of x from f(x) to g(x) is considered where g(x) can be interpreted as representing greater uncertainty. A set of conditions on the behavior of the ratio of f(x) to g(x) over the support of x are derived sufficient to sign the effect of the shift on the decision variable. Copyright 1989 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
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Bibliographic InfoArticle provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.
Volume (Year): 30 (1989)
Issue (Month): 1 (February)
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- Gollier, Christian, 2009.
"Portfolio Choices and Asset Prices: The Comparative Statics of Ambiguity Aversion,"
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- Gollier, Christian & Schlesinger, Harris, 1996. "Portfolio choice under noisy asset returns," Economics Letters, Elsevier, vol. 53(1), pages 47-51, October.
- Hau, Arthur, 2006. "Production under uncertainty with insurance or hedging," Insurance: Mathematics and Economics, Elsevier, vol. 38(2), pages 347-359, April.
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