Expected utility hypothesis

happen next, doesn’t mean we will. Moreover, clinging to assurances can do activeactively harm to us, our lives, and our economy. Recognizing the limits of our ability to forecast could leave us healthier, safer and richer. Consider the impact of perceived certainty on investment and business decisions. When corporations and investors operate with a perception of high certainty, we often see: formatting - I think the following should be in a 2-column table Table Name: Certainty Regime • Increased leverage: Risk premiums on investment are lower, leaving leverage as the only means of achieving decent returns on equity. • Over-concentration: If outcomes are known (or we think they are known), investors will concentrate on those investments expected to pay off. • Lack of hedging: With low and leveraged returns, the cost of hedging investments may eat up too much of anticipated profits. • Crowded investments: Everyone has the same position, so it is both more expensive to hedge and there is a rush for the exit if there are indications things may reverse. When uncertainty is high, we find more constructive behavior: formatting - I think the following should be in a 2-column table Table Name: Uncertainty Regime • Debt reduction: Instead of leverage to enhance low risk premia, we might see reduced borrowing and returns from higher risk premia. The odds of default decline. Credit lines remain untapped and are available if and when opportunities arise. • Cost savings: While one may…

dealt with as well. An example of certainty affect would be, shopping. One day, I found a deal for buy one get one free prenatal vitamins at one store whereas; another store did not have this deal. The vitamins at both these stores were the same price. I choose the first store that had the buy one get one free prenatal vitamins because instead of paying full price and only getting one bottle, I can pay full price and get another bottle for free so in reality I got more for my buck. In my…

The future The potential future benefit from completing my degree and finding employment in information architecture based on an annual salary of $100,000 per year over the next 10 years, taking into account paying off my student loans, and starting as an entry level e-commerce specialist starting at $77,000 and working my way up to an average of $115,000 per year. (My Footpath, 2013). The theory of expected utility takes into account there being three types of individuals-risk neutral, risk…

These tastes and preferences play an important role in decision making. Acquiring these utilities or preferences is the highest interest. Therefore, as postulated by the rational choice theory, any decision made with the view of maximizing these utilities after evaluating the available alternatives based on the perfect information provided is considered rational. While the rational choice theory provides a plausible explanation for human behavior as individuals or collectively as a society or…

This article analyses the effects of the innovative “philanthropic” initiative by leading shoe brands such as, TOMS and Sketchers. In this critical analysis, I would first focus on the term corporate philanthropy, and then discuss the overall effects and success of this “one for one” initiative. First I would discuss corporate philanthropy. To regard such programs solely aimed at ameliorating underdeveloped communities would be naïve at best. We have to remember that businesses are still profit…

1. A. Due to the utility function U(H,B) point C violates the utility function because it is not consistent with the marginal utility that increases from Point A to C in this model. Point C implies that this person can only be made better off with bread and not health. B. If point C is chosen their utility function would look like the the utility function labeled U1. (This is similar to a utility function with homothetic preferences) C. Point E can never be an equilibrium because given the…

happiness is intended pleasure, and the absence of pain”. (Mill 1990, 172). Essentially, Mill stated in his article that Utilitarianism defines a morally correct action to be one that produces the maximum amount of utility or pleasure within an act. In addition to the positive thesis of Utilitarianism, each unit of pleasure can be expressed as a “hodon” and each unit…

As media strategist it is extremely important for us to know the flow of content strategy. Each content on a website, social media, or any other platform is planned out before hand. However, content is not published on the spot if you’re a media strategist, perhaps, it will run through a phase of strategy in order to maximize its value. As a matter of fact, the Lynda UX: Content Strategy course is a useful tool to understand how content strategy works and how to begin the process. With that…

Journal Article Summary Adults express preferential biases towards individuals with similar commonalities, and infants share these ideologies as well. Psychological Science published an article, which discussed the concept of selectivity among infants in their first year of life. The article instated that infants perceptually distinguished individuals based on common relations and they elaborated on the correlation between the infants’ likings and shared similarities and dissimilarities by…

Reading #1: The Last Land by Yang Kwija shows the lives of the people living Wonmi-Dong and centers explicitly on character old man Kang. The chapter presents an interesting example of the idea of what makes something useful, and how this concept of utility differs person to person to each person. To the Gangnam land developers utility is turning land that has no buildings on it, into profitable apartment complexes. To regular community members, the best way to utilize land is to beautify it,…