What's in a U?

 (Unfinished- will try getting it done by next week but here are the notes I took:)



What’s in a u?


Expected utility theory is


a foundational model in economics for how people make decisions under uncertainty (when outcomes are risky).



classical view

risk aversion comes from a place of finishing marginal utility. 1 million sure for sure is better than a 50/50 for 2 million or 0. The utility to buy what we have with the million is better than what we can with the second million


decision theorist


Yaari- horses of different colours.

How to measure risks


treat utility as a yardstick and compare such that it can be traded with money/commodity.



marginal rate of substitution


curvature or u star

cara transformation


why do billionaires buy insurrance?


time random lottery, you don’t know when you are going to be paid 



relating economics and psychology: 


economics use choice based basis on nearing risk, through mainly the economics domain. Pysocholhy uses surveys through different domains. they might be imprecise but they might revive more stable rankings between 



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