Choice under uncertainty Flashcards
1
Q
what does neutrality mean
A
will just accept a fair gamble
2
Q
what does aversion mean
A
will reject some better than fair gambles
3
Q
what does loving mean
A
will accept some unfair gambles
4
Q
risk premium d
A
the amount you would sacrifice to eliminate the risk
5
Q
for the closed graphs for choice under uncertainty what does a steep indifference curve tell you about preferences (edgeworth box)
A
if steeper then they prefer the other one (opposite of indifference curves in first year)
6
Q
what do you always do for choice under uncertainty
A
maximise expected utility
