ORCID Profile
0000-0002-4003-6222
Current Organisation
Macquarie University
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Publisher: WORLD SCIENTIFIC
Date: 26-12-2023
DOI: 10.1142/12789
Publisher: SAGE Publications
Date: 2014
Abstract: Financial decision-making is not straightforward, in part, because such decisions generally involve comparing financial assets the payoffs from which are subject to risk and uncertainty. Given that situation, two questions naturally arise: How do economic agents go about the business of making choices in the face of risk and uncertainty? And, how should economic agents make choices in the face of risk and uncertainty? This paper concentrates on the first of these questions and discusses some of the main attempts made by economic theory to understand how economic agents go about the business decision-making under conditions of risk and uncertainty. Theoretical possibilities considered in the context of decisions under conditions of risk include: Expected value maximization, Expected utility maximization, Rank dependent utility maximization, Prospect theory, and the Topology of fear approach to decision-making in the face of catastrophic risk. This paper also considers empirical tests of these theoretical possibilities and some of the anomalies and responses thrown up by those tests such as: Allais Paradox, Discovered Preference Hypothesis, and the choice behaviour of CEOs when faced with risk. The paper concludes with a brief excursion into choice under uncertainty where, unlike in risky choice situation, the existence of objective probabilities over states of the world cannot be relied on. In that context, the author briefly canvases the Subjective Expected Utility approach — which is unable in general to account for ambiguity aversion — Choquet utility, Wald's Multiple Priors, and the Case Based approach This paper highlights the fact that the rich and fascinating field of decision-making under risk and uncertainty is characterized by a constant interplay between theoretical conjecture, empirical testing, and theoretical refinement. Such interplay is mirrored by this paper and contributions in the Colloquium Section of this Issue, where the thoughts of practitioners and academics interact.
Publisher: Elsevier
Date: 2006
Publisher: Elsevier BV
Date: 07-2018
Publisher: WORLD SCIENTIFIC
Date: 15-11-2016
Publisher: Informa UK Limited
Date: 1994
Publisher: SAGE Publications
Date: 2014
Publisher: Informa UK Limited
Date: 11-2010
Publisher: Wiley
Date: 03-1980
Publisher: Elsevier BV
Date: 03-2017
Publisher: Wiley
Date: 03-1991
Publisher: Informa UK Limited
Date: 02-1991
Publisher: Springer Science and Business Media LLC
Date: 18-02-2021
Publisher: Oxford University Press
Date: 19-10-2022
DOI: 10.1093/ACREFORE/9780199389414.013.611
Abstract: General equilibrium theory thinks of the economy as a collection of interconnected markets, each of which, in isolation and in combination, is driven toward some sort of equilibrium. Computable general equilibrium (CGE) models add to this abstract point of view by calibrating models of the economy using actual economic data. The aim is to empirically solve for equilibrium demand, supply, and price levels across the markets in the economy. Many areas of economic analysis, reform, and policymaking have benefitted from scrutiny in a CGE context. This is particularly true of issues to do with tax and tariff reform, where CGE models first gained prominence. More recently, the areas of environmental economics and regulation has attracted the attention of CGE modelers. Considerations of environment and environmental regulation, inevitably involve a consideration of issues to do with water. Such issues range from aquaculture through pricing of water to virtual water—and many points in between. In the analysis of each of these issues—and the role water plays in the overall economy, CGE models have made an important contribution to understanding and informed policymaking.
No related grants have been discovered for Tony Bryant.