Questions tagged [uncertainty]

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17
votes
6answers
539 views

Experiments contradicting the expected utility model

This is a question I asked on the cognitive science beta which never got any answer there. I do not know what the policy should be for question migration/reposting (maybe worth discussing in the meta?)...
4
votes
1answer
82 views

Multiplicative factorization of stochastic growth time series--solving for an eigenfunction/eigenvector

I'm trying to understand the tools used/presented in Lars Hansen's Econometrica paper "Dynamic Valuation Decomposition within Stochastic Economies." In a part in the paper, Hansen introduces a long-...
10
votes
2answers
611 views

Can the Machina Paradox be solved by expanding the choice set?

In another question, the Machina paradox is mentioned as a possible counterexample to the expected utility model: Adding to the list of paradoxes, consider Machina's paradox. It is described in Mas-...
8
votes
2answers
250 views

Will high computing power substitute the certainty-equivalence assumption?

Bloom in a recent JEP paper considers that "the increase in computing power has made it possible to include uncertainty shocks directly in a wide range of models, allowing economists to abandon ...
12
votes
2answers
175 views

How could the Euro zone be broken up in an ordered way?

Let’s assume that the members of Euro zone all agreed that it would end in 18 months time with each country getting its own currency. What process could be put in place to allow this to happen ...
8
votes
5answers
581 views

References for particular definitions of risk and uncertainty

I have some doubts about risk vs. uncertainty. I have read the thread "What is the difference between risk, uncertainty and ambiguity" and have skimmed through Knight's "Risk, Uncertainty, and Profit" ...
3
votes
1answer
256 views

Question on uncertainity

Please imagine that Nicole is uncertain of her future wealth. Her wealth in the bad state of the world is zero. Her wealth in the good state is $w>0$. Each state is initially equally likely. ...
8
votes
2answers
677 views

How is momentum justified as a common risk factor?

Momentum as a common risk factor? This question is partly a follow-up to another question found here. In this other question it was noted in momentum is difficult to explain as a common risk factor ...
5
votes
1answer
438 views

Independence axiom of lottery when $\alpha \ge 1$

When studying preference over lotteries we learned the independence axiom which goes like this: The preference relation $\succsim$ on the space of simple lotteries $\mathscr{L}$ satisfies the ...
0
votes
1answer
42 views

Optimal strategy in a single-agent choice problem under uncertainty

Consider the following single-agent choice problem under uncertainty. Let $V$ be the state of the world with support $\mathcal{V}$ and probability distribution $P_V\in \Delta(\mathcal{v})$. First, ...