PPT-Risky Curves: On the Empirical Failure of Expected Utility

Daniel Friedman R Mark Isaac Duncan James and Shyam Sunder Fifth LeeX International Conference on Theoretical and Experimental Macroeconomics Barcelona GSE Summer Forum Universitat. P.V. . Viswanath. For a First Course in . INvestments. Learning Goals. 2. How do we characterize individuals’ preferences for taking risk?. How do we use utility functions over asset returns?. How do we evaluate investors’ risk preferences?. M. . Ramanathan. Problems in curves and surfaces. Simple problems. Given a point . p. and a parametric curve . C(t), . find the minimum distance between . p . and. C(t). Problems in curves and surfaces. Capital Allocation to Risky Assets. Risk with simple prospects. Investor’s view of risk. Risk aversion and utility. Trade-off between risk and return. Asset risk versus portfolio risk. Capital allocation across risky and risk-free portfolios. When drawing, h. ow . do straight lines become curved lines?. Designed for DVI by Camilla S. Haneberg. What is a line anyway?. Line has MANY different meanings: you can wait in line, there is a line of scrimmage in football, line is used in math all the time, it can be a fabricated thought…”can you believe the line that guy used?”. McGraw-Hill/Irwin. Copyright © 2011 by the McGraw-Hill Companies, Inc. All rights reserved.. In business we are forced to make decisions involving risk—that is, where the consequences of any action we take is uncertain due to unforeseeable events. Where do we begin?. U: O-> R (utility maps from outcomes to a real number). represents preferences over outcomes. ~ means indifference. We need a way to talk about how preferences interact with uncertainty:. A . lottery . at . Thameside. Primary School. Why outside?. Being outside promotes…. freedom . and space to move, and inspires different movement from that indoors. This is vital for young children to develop their coordination, build muscle mass and experiment with moving their bodies. . Assoc.Prof. .. Dr. . Ahmet . Zafer . Şenalp. e-mail: . azsenalp@gmail.com. Mechanical Engineering Department. Gebze. Technical University. ME 521. Computer. . Aided. . Design. . Curves are the basics for surfaces. Warm-up Question. What do dating and marriage have to do with economics? . Scarcity. Choice. Utility maximization . Economics and Marriage. A market is any mechanism or institution that brings buyers together with sellers. John Lee. Department of Political Science. Florida State University. Utility. The idea that we can assign value to an action and then choose amongst a set of possible actions based on their value.. My grandma could offer me $50 or $100. I choose the offer that maximizes my utility. In this case, I choose $100.. Consumer Choice. Postulate: . an unproved and indemonstrable statement that should be taken for granted: used as an initial premise or underlying hypothesis in a process of . reasoning. Consumer choice postulate: People choose from available options to maximize their well-being (utility).. Introduction. Supply and Demand Models (Ch. 2) are useful for analyzing economic questions concerning markets.. How will increasing the real wage affect output?. In these models we summed each individuals demand to obtain the market demand curve.. …. Think of a client you know for whom substance use has been a problem.. Thought exercise. …. Think of a client you know for whom substance use has been a problem.. Forget everything you know about:. Daniel Friedman, UC Santa Cruz. Shyam. Sunder, Yale University. (expanding into book with . Duncan James and R. Mark Isaac) . ESA Tucson, November 17, 2012. 2. Risky Curves. 2. Fire: Circa 1750 CE. Everyone knew fire to be an element.