Moral hazard has been studied by insurers and academics; such as in the work of Kenneth Arrow, Tom Baker, and John Nyman. The name comes originally from the insurance industry. Insurance companies worried that protecting their clients from risks (like fire, or car accidents) might encourage those clients to behave in riskier ways (like smoking in bed or not wearing seatbelts).
See Shepsle, Kenneth A., Essays on Risky Choice in Electoral Competition (unpublished doctoral dissertation, University of Rochester, 1970), Chap. 4. Also see Samberg, Robert G., “ Collective Decision-Making in a Bounded Prospect Space ,” a paper delivered at the Sixty-sixth Annual Meeting of the American Political Science Association, Los Angeles, 1970.
Isoelastic utility explained. In economics, the isoelastic function for utility, also known as the isoelastic utility function, or power utility function is used to express utility in terms of consumption or some other economic variable that a decision-maker is concerned with. The isoelastic utility function is a special case of hyperbolic absolute risk aversion and at the same time is the.
In the General Theory, Keynes argued that expectations about future bond prices tend to be “sticky”.A rise in bond prices causes more investors to “join the bear brigade” and so increases the aggregate demand for money. Since Tobin's classic article on liquidity preference, this explanation of the downward sloping demand for money curve has largely disappeared from the literature.
Kenneth J. Arrow, M.D. Intriligator. The Handbook of Mathematical Economics aims to provide a definitive source, reference, and teaching supplement for the field of mathematical economics. It surveys, as of the late 1970's the state of the art of mathematical economics. This is a constantly developing field and all authors were invited to review and to appraise the current status and recent.
Early retirement income research focused primarily on determining the optimal safe initial withdrawal rate using a probability of success analysis where portfolio withdrawals were constant in real terms (they rose with inflation), retirement lasted for a fixed period (usually 30 years), and investment returns were based on long-term historical U.S. averages.
Risk aversion explained. In economics and finance, risk aversion is the behavior of humans (especially consumers and investors), who, when exposed to uncertainty, attempt to lower that uncertainty.It is the hesitation of a person to agree to a situation with an unknown payoff rather than another situation with a more predictable payoff but possibly lower expected payoff.
ECONOMICS 200B --- MICROECONOMIC THEORY MARKETS AND WELFARE The principal text for (most of) the first five weeks of the course is Starr, General Equilibrium Theory: An Introduction. Corrigenda for the first edition is available on the class webpage. Draft chapters for the second edition are available on the class webpage.
We study various decision problems regarding short-term investments in risky assets whose returns evolve continuously in time. We show that in each problem, all risk-averse decision makers have the same (problem-dependent) ranking over short-term risky assets. Moreover, in each of these problems, the ranking is represented by the same risk index as in the case of CARA utility agents and.