Uncertainty in Economics

Uncertainty in Economics

Readings and Exercises

1st Edition - January 28, 1978

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  • Editors: Peter Diamond, Michael Rothschild
  • eBook ISBN: 9781483264509

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Uncertainty in Economics: Readings and Exercises provides information pertinent to the fundamental aspects of the economics of uncertainty. This book discusses ho uncertainty affects both individual behavior and standard equilibrium theory. Organized into three parts encompassing 30 chapters, this book begins with an overview of the relevance of expected utility maximization for positive and normative theories of individual choice. This text then examines the biases in judgments, which reveal some heuristics of thinking under uncertainty. Other chapters consider the effect of restricting trade in contingent commodities to those trades that can be affected through the stock and bond markets. This book discusses as well the individual problem of sequential choice and equilibria, which are built around the notion of sequential choice. The final chapter deals with an entirely different aspect of the economics of information and reverts to the assumption that markets are perfect and costless. This book is a valuable resource for economists and students.

Table of Contents

  • Preface

    I. Individual Choice in a Static Setting

    1. Risk Taking by Individual Option—Case Study—Cigarette Smoking, in "Perspectives on Benefit Risk Decision Making," pp. 73-84. Washington, D.C.: National Academy of Engineering, 1972

    2. Judgment Under Uncertainty: Heuristics and Biases, Science 185 (1974), 1124-1131

    3. Axiomatic Theories of Choice, Cardinal Utility and Subjective Probability: A review, in "Allocation Under Uncertainty: Equilibrium and Optimality,"(J. Drèze, Ed.), pp. 3-23. New York and Toronto: Wiley, 1974

    4. Risk Aversion in the Small and in the Large, Econometrica 32 (1964), 122-136

    Exercise on Demand for Insurance

    5. Some Remarks on Measures of Risk Aversion and their Uses, Journal of Economic Theory 1 (1969), 315-329

    6. Increasing Risk I: A Definition, Journal of Economic Theory 2 (1970), 225-243


    7. Notes and Exercises on Increasing Risk

    8. Savings and Uncertainty: The Precautionary Demand for Saving, Quarterly Journal of Economics 82 (1968), 465-473

    Exercise on Savings Under Uncertainty

    9. Two Omitted Topics: Mean-Variance Analysis and the Expected Value of Information

    10. The Effect of Uncertainty on Resource Allocation, Quarterly Journal of Economics 85 (1971), 440-453. (Part of the Article is Omitted)

    II. General Equilibrium in a Static Setting

    11. "Theory of Value," Chapter 7, pp. 98-102, New York: Wiley, 1959


    Exercise on Equilibrium Prices and Consumption


    12. Competitive Equilibrium Under Uncertainty, Econometrica 36 (1968), 31-58


    13. The Role of a Stock Market in a General Equilibrium Model with Technological Uncertainty, American Economic Review 57 (1967), 759-773 (Appendix Omitted)


    14. Exercise on Uniform Pricing

    15. The Market for Lemons: Qualitative Uncertainty and the Market Mechanism, Quarterly Journal of Economics 84 (1970), 488-500


    16. Notes and Exercises on the Use of Imperfect Information

    17. Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information, Quarterly Journal of Economics 90 (1976), 629-650


    18. Job Market Signaling, Quarterly Journal of Economics 87 (1973), 355-374

    Exercise: A Signaling Equilibrium with a Continuum Of Skill Classes


    19. Overinsurance and Public Provision of Insurance: The Roles of Moral Hazard and Adverse Selection, Quarterly Journal of Economics 88 (1974), 44-54

    Exercises on Optimal Insurance


    20. Insurance, Information, and Individual Action, American Economic Review 61 (1971), 380-387


    21. Uncertainty and the Welfare Economics of Medical Care, American Economic Review 53 (1963), 941-969 (Appendix Omitted)

    22. Transaction Costs, Risk Aversion, and the Choice of Contractual Arrangements, Journal of Law and Economics 12 (1969), 23-42


    23. Two Omitted Topics: Product Liability and Workers' Compensation

    24. Uncertainty and the Evaluation of Public Investments, American Economic Review 60 (1970), 364-378


    III. Sequential Choice and Equilibrium with Limited Information

    25. Searching for the Lowest Price When the Distribution of Prices is Unknown, Journal of Political Economy 82 (1974), 689-711

    Exercises on Search Rules

    26. Central Planning, Monopoly, Duopoly

    27. Models of Market Organization with Imperfect Information: A Survey, Journal of Political Economy 81 (1973), 1283-1308


    Exercise on Information and Prices

    28. Equilibrium Distributions of Sales and Advertising Prices, Review of Economic Studies (Appendix Omitted) Vol. XLIV (3), (1977), 465-491

    29. Equilibrium Search and Unemployment, Journal of Economic Theory 7 (1974), 188-209


    30. The Private and Social Value of Information and the Reward to Inventive Activity, American Economic Review 61 (1971), 561-574

Product details

  • No. of pages: 586
  • Language: English
  • Copyright: © Academic Press 1978
  • Published: January 28, 1978
  • Imprint: Academic Press
  • eBook ISBN: 9781483264509

About the Editors

Peter Diamond

Affiliations and Expertise

Massachusetts Institute of Technology, Cambridge, Massachusetts, U.S.A.

Michael Rothschild

Affiliations and Expertise

University of California at San Diego, La Jolla, U.S.A.

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