Decision Theory under uncertainty is a PowerPoint presentation from Marcus Vera-Hernandez of University College London. It is a straightforward depiction of decision-making under risk, showing how risk attitudes can be examined using choices among lotteries or willingness to pay for insurances. Shows how risk attitudes can be captured in convexity of the indifference curve or strict concavity of the utility function; and how risk aversion can be quantified by the ratio of second and first derivatives of the utility function, implying that it falls as wealth increases.
Online Text and Notes in Consumption and Households
Marcos Vera-Hernandez, University College London
Colin F Camerer, California Institute of Technology, George Loewenstein, Carnegie-Mellon University
Behavioral Economics is a draft of the opening chapter of C Camerer, G Loewenstein and M Rabin (eds)(2003) Advances in Behavioral Economics, Princeton University Press. It covers the main heuristics and judgement biases revealed by psychological experiments and statistical surveys on choice, and the implications for macroeconomics, financial economics, labour economics and other areas where 'rational' choice is traditionally assumes.
