April 19 _ 21 - Utility maximization problem with state...

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x U(x) Econ 100A – Microeconomics Professor Sarah Reynolds Department of Economics University of California, Berkeley Textbook by Thomas Nechyba Choice and Markets in the Presence of Risk Chapter 17 – April 19 th , 2011 A risk adverse utility function is Probability of being hit by a car: Income if hit: Utility if hit: Income if not hit: Utility if not hit: Expecetd value of the utilities: Utility of the expected value: Certainty Equivalent Risk Premium
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x U(x) Condition such that the insurance company makes a profit: Actuarially fair insurance: Full insurance: Condition such that the customer will buy the insurance:
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x g x b Choosing an insurance policy: (from the customer’s perspective) Utility maximization problem without dependence over states:
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Unformatted text preview: Utility maximization problem with state dependent utility: x g x b x g x b Econ 100A Microeconomics Professor Sarah Reynolds Department of Economics University of California, Berkeley Textbook by Thomas Nechyba Asymmetric Information In Competitive Markets Chapter 22 April 21 st , 2011 Asymmetric Information: Choosing premium-benefit bundles from the perspective of the firm: Two consumers: x g x b Separating Equilibrium: The Math: x g x b Pooling Equilibrium: Insurance x b Insurance x b Asymmetric Information and the Market Deadweight loss from Asymmetric Information & the pooling solution Deadweight loss from Asymmetric Information & the screening solution...
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This note was uploaded on 09/11/2011 for the course ECON 100A taught by Professor Woroch during the Spring '08 term at University of California, Berkeley.

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April 19 _ 21 - Utility maximization problem with state...

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