{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

PPTChapter12

# PPTChapter12 - Managerial Economics Professor Cliff Hawley...

This preview shows pages 1–7. Sign up to view the full content.

Prof. Clifford B. Hawley Managerial Economics Professor Cliff Hawley BADM 631 The Economics of Information and Decisions under Risk and Uncertainty Chapter 12

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Prof. Clifford B. Hawley Decisions under Risk Most people view risk as something that may be worth avoiding -- something that you would pay to avoid. Hence the popular institutions of auto insurance, health insurance, life insurance, and homeowners insurance
Prof. Clifford B. Hawley Decisions under Risk Decisions are made today that affect the future. But future outcomes such as profits, income, and wealth are uncertain --for firms, entrepreneurs and individuals. To understand these decisions we use the tools of probability and statistics.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Prof. Clifford B. Hawley Expected Value (or mean) is a weighted average of each outcome and its probability. Ex: Suppose you have a 75% chance of profits of \$100 million and a 25% chance of profits of \$20 million.
Prof. Clifford B. Hawley E(X) = Expected value of X X Pr(X) \$100 0.75 \$20 0.25 then E(X) = (.75 x 100) + .25 x (20) = \$80 million

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Prof. Clifford B. Hawley
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### Page1 / 21

PPTChapter12 - Managerial Economics Professor Cliff Hawley...

This preview shows document pages 1 - 7. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online