Lecture02-2010 - An Overview of Decision Making Under Risk...

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An Overview of Decision Making Under Risk and Uncertainty: Lecture II Charles B. Moss May 17, 2010 I. Introduction A. Economics is the study of choices 1. Consumer demand - the choice of goods and services 2. Production - choices of inputs used to create outputs B. Students of economics realize that many of these choices cannot be explained by simplistic models. 1. Property rights 2. Government barriers 3. Imperfect or incomplete information II. Formulating the Risk Problem A. Agreement on terminology 1. A basic assumption is there exists at least two actions a 1 and a 2 . 2. The outcome of these actions will be a±ected by a random event E . 3. One of the things that makes an event random is that it has more than one possible value A or B . 4. The combination of the action and the random event is an outcome o a | A is the outcome for using action a 1 under event A . B. Fertilizer Case 1
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AEB 6182 Agricultural Risk Analysis and Decision Making Professor Charles B. Moss Lecture II Fall 2010 1 - Action 1 a 2 - Action 2 a Event or EAB = 11
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This note was uploaded on 07/15/2011 for the course AEB 6182 taught by Professor Weldon during the Fall '08 term at University of Florida.

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Lecture02-2010 - An Overview of Decision Making Under Risk...

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