Uncertainty in Economics : Readings and Exercises.

Front Cover -- Uncertainty in Economics: Readings and Exercises -- Copyright Page -- Table of Contents -- Dedication -- Preface -- Part I: INDIVIDUAL CHOICE IN A STATIC SETTING -- Chapter 1. Risk taking by individual option-Case study: Cigarette smoking -- PHARMACOLOGICAL BENEFITS -- PSYCHOLOGICAL BENEFITS -- REFERENCES -- Chapter 2. Judgment under uncertainty: Heuristics and biases -- Representativeness -- Availability -- Adjustment and Anchoring -- Discussion -- Summary -- References and Notes -- Chapter 3. Axiomatic theories of choice, cardinal utility and subjective probability: A review -- I. HISTORICAL PERSPECTIVE -- II. THE CONCEPTUAL FRAMEWORK -- III. AXIOMS OF A NORMATIVE THEORY -- IV. OBJECTIONS TO THE NORMATIVE APPEAL OF THE AXIOMS -- V. MERITS AND LIMITATIONS OF THE THEORY -- VI. LINK WITH ECONOMIC APPLICATIONS -- REFERENCES -- Chapter 4. Risk aversion in the small and in the large -- 1. SUMMARY AND INTRODUCTION -- 2. THE RISK PREMIUM -- 3. LOCAL RISK AVERSION -- 4. CONCAVITY -- 5. COMPARATIVE RISK AVERSION -- 6. CONSTANT RISK AVERSION -- 7. INCREASING AND DECREASING RISK AVERSION -- 8. OPERATIONS WHICH PRESERVE DECREASING RISK AVERSION -- 9. EXAMPLES -- 11. CONSTANT PROPORTIONAL RISK AVERSION -- 12. INCREASING AND DECREASING PROPORTIONAL RISK AVERSION -- 13. RELATED WORK OF ARROW -- Exercise on demand for insurance -- Chapter 5. Some remarks on measures of risk aversion and their uses -- I -- II -- Ill -- IV -- REFERENCES -- Chapter 6. Increasing risk:I. A definition -- I. INTRODUCTION -- II. THE INTEGRAL CONDITIONS -- III. PARTIAL ORDERINGS OF DISTRIBUTION FUNCTIONS -- IV. MEAN-VARIANCE ANALYSIS -- ACKNOWLEDGMENTS -- REFERENCES -- Comment -- Chapter 7. Notes and exercises on increasing risk -- References -- Chapter 8. Savings and uncertainty: The precautionary demand for saving -- I. INTRODUCTION.

II. A Two PERIOD MODEL OF CONSUMPTION -- III. THE EFFECT OF UNCERTAINTY ON SAVING -- IV. DECREASING RISK AVERSION AND PRECAUTIONARY SAVING -- V. SPECULATIONS ON THE CONSUMPTION FUNCTION -- VI. CONCLUSION -- Exercise on savings under uncertainty1 -- Chapter 9. Two omitted topics: Mean-variance analysis and the expected value of information -- References -- Chapter 10. The effect of uncertainty on resource allocationin a General Equilibrium Model -- I. INTRODUCTION -- II. SOME PARTIAL EQUILIBRIUM RESULTS -- III. MODEL ONE: RANDOM LABOR SUPPLY -- APPENDIX -- Part II: GENERAL EQUILIBRIUM IN A STATIC SETTING -- Chapter 11. "Theory of Value," Chapter 7 -- 7.1. INTRODUCTION -- 7.2. EVENTS -- 7.3. COMMODITIES AND PRICES -- 7.4. PRODUCERS -- 7.5. CONSUMERS -- 7.6. EQUILIBRIUM -- 7.7. OPTIMUM -- References -- Exercise on equilibrium prices and consumption -- Comment -- Chapter 12. Competitive equilibrium under uncertainty -- I. INTRODUCTION -- 2. STATES AND ACTS -- 3. FIXED INFORMATION ABOUT THE ENVIRONMENTS -- STRATEGIES -- 4. CONSUMERS AND PRODUCERS -- 5. EQUILIBRIUM -- 6. OPTIMUM -- 7. AN EXAMPLE -- 8. INFORMATIONAL CONSTRAINTS ON TRADE -- 9. CHOICE OF INFORMATION -- 10. NETWORK INFORMATION -- 11. MARKET INFORMATION AND DEFERRED MARKETS -- 12. COMPUTATION -- 13. CONCLUSION -- REFERENCES -- Comment -- Chapter 13. The role of a stock market in a general equilibrium model with technological uncertainty -- I. States of Nature -- II. Centrally Planned Economy -- III. Stock Market Equilibrium -- IV. Production Decisions -- V. Implications -- REFERENCES -- Comment -- Chapter 14. Exercise on uniform pricing -- References -- Chapter 15. The market for" lemons": Qualitative uncertainty and the market mechanism -- I. INTRODUCTION -- II. THE MODEL WITH AUTOMOBILES AS AN EXAMPLE -- III. EXAMPLES AND APPLICATIONS -- IV. COUNTERACTING INSTITUTIONS -- V. CONCLUSION.

Comment -- Reference -- Chapter 16. Notes and exercises on the use of imperfect information -- A. The Basic Model -- B. Job Placement -- C. Expected Output and Wages -- D. Exercise on Full Information -- E. Exercise on Differential Variances -- Reference -- Chapter 17. Equilibrium in competitive insurance markets: An essay on the economics of imperfect information -- I. THE BASIC MODEL -- II. ROBUSTNESS -- III. CONCLUSION -- REFERENCES -- Comment -- Chapter 18. Job market signaling -- 1. INTRODUCTION -- 2. HIRING AS INVESTMENT UNDER UNCERTAINTY -- 3. APPLICANT SIGNALING -- 4. INFORMATION FEEDBACK AND THE DEFINITION OF EQUILIBRIUM -- 5. PROPERTIES OF INFORMATIONAL EQUILIBRIA: AN EXAMPLE -- 6. THE INFORMATIONAL IMPACT OF INDICES -- CONCLUSIONS -- Exercise: A signaling equilibrium with a continuum of skill classes -- Comment -- Chapter 19. Overinsurance and public provision of insurance: The roles of moral hazard and adverse selection -- I. THE COMPETITIVE ALLOCATION OF INSURANCE UNDER MORAL HAZARD -- II. "COMPETITIVE" EQUILIBRIUM -- III. MORAL HAZARD AND PUBLIC PROVISION -- IV. ADVERSE SELECTION AND THE COMPETITIVE MARKET -- V. ALTERNATIVE DEVICES FOR DEALING WITH ADVERSE SELECTION AND MORAL HAZARD FROM OVERINSURANCE -- Exercises on optimal insurance -- Comment -- References -- Chapter 20. Insurance, information, and individual action -- Case I : No individual Choice- Insurer Monitors n -- Case II : Individual Chooses Before Nature -Insurer Monitors R and a -- Case III: Individual Chooses Before Nature -Insurer Monitors Only R -- Case IV: Individual Chooses After Nature -Insurer Monitors n and a -- Case V: Individual Chooses After Nature -Insurer Monitors Only a -- Conclusion -- Comment -- Chapter 21. Uncertainty and the welfare economics of medical care -- I. Introduction: Scope and Method.

II. A Survey of the Special Characteristics of the Medical-Care Market -- III. Comparisons with the Competitive Model under Certainty -- IV. Comparison with the Ideal Competitive Model under Uncertainty -- Postscript -- REFERENCES -- APPENDIX -- Chapter 22. Transaction costs, risk aversion, and the choice of contractual arrangements -- I. THE CHOICE OF CONTRACTS IN AGRICULTURE -- II. CHARACTERISTICS OF FIXED AND SHARE CONTRACTS (CHINA, 1925-1940) -- III. THE DURATION OF LEASE CONTRACTS -- IV. CONCLUDING REMARKS -- Comment -- References -- Chapter 23. Two omitted topics: Product liability and workers' compensation -- References -- Chapter 24. Uncertainty and the evaluation of public investments -- I. Markets for Contingent Claims and Time-Risk Preference9 -- II. The Public Cost of Risk-Bearing -- III. The Actual Allocation of Risk -- REFERENCES -- Comment -- References -- Part III: SEQUENTIAL CHOICE AND EQUILIBRIUM WITH LIMITED INFORMATION -- Chapter 25. Searching for the lowest price when the distribution of prices is unknown -- I. Introduction -- II. Preliminaries -- III. An Example -- IV. The Optimal Strategy -- V. Finiteness of Search -- VI. Reservation Prices -- VII. Effects of Increasing Uncertainty -- VIII. Conclusion -- References -- Exercises on search rules -- Chapter 26. Central planning, monopoly, duopoly -- References -- Chapter 27. Models of market organization with imperfect information: A survey -- I -- II -- Ill -- IV -- V -- VI -- VII -- Appendix -- References -- Comment -- Chapter 28. Equilibrium distributions of sales and advertising prices -- 1. INTRODUCTION -- 2. BASIC MODEL -- 3. BUYERS' SEARCH -- 4. EFFICIENCY -- 5. FURTHER EXTENSIONS -- 6. CONCLUSION -- REFERENCES -- Chapter 29. Equilibrium search and unemployment -- 1. INTRODUCTION -- 2. STRUCTURE OF THE MODEL -- 3. EQUILIBRIUM IN A SINGLE MARKET.

4. THE EQUILIBRIUM DISTRIBUTION OF THE WORKFORCE -- 5. ECONOMY-WIDE EQUILIBRIUM -- 6. STABILITY OF EQUILIBRIUM -- 7. CONCLUDING REMARKS -- APPENDIX: EXAMPLES -- ACKNOWLEDGMENT -- REFERENCES -- Comment -- Chapter 30. The private and social value of information and the reward to inventive activity -- I. Foreknowledge Versus Discovery -- II. Elements of the Economics of Foreknowledge -- III. The Value of Foreknowledge: Pure Exchange -- IV. The Value of Foreknowledge: Production and Exchange -- V. Distributive Considerations, Public Information, and Homogeneity of Beliefs -- VI. The Value of Discovery Information -- VII. Implications for Patent Policy -- Summary -- REFERENCES.

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.

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