Decision-Making under Uncertainty

This new text deals with topics that are at the core of microeconomic theory - the economics of uncertainty and the economics of games and decisions. It contains a chapter on non-expected utility theory and very up to date coverage of such topics as risk aversion, stochastic dominance and mean-variance utility theory as well as a number of chapters that discuss and illustrate the use of game theory in making decisions under uncertainty. Front Matter....Pages i-xiv Front Matter....Pages 1-1 The Expected Utility Theory....Pages 3-18 Risk Aversion....Pages 19-29 The Insurance Market....Pages 30-43 Stochastic Dominance and Risk Comparisons....Pages 44-53 Non-Expected Utility Theories....Pages 54-72 Portfolio Analysis and the Mean-Variance Utility Theory....Pages 73-90 Efficient Contracts under Uncertainty: The Principal-Agent Theory....Pages 91-105 Collective Decisions under Uncertainty....Pages 106-116 Front Matter....Pages 117-117 An Introduction to the Theory of Games....Pages 119-130 Non-Cooperative Game Theory....Pages 131-142 Selected Topics in Non-Cooperative Game Theory....Pages 143-157 Games and Collective Decisions....Pages 158-173 Evolutions and Games....Pages 174-184 Games against Nature and the Role of Information in Decision-Making under Uncertainty....Pages 185-196 Back Matter....Pages 197-215 This book systematically develops essential concepts in the economics of uncertainty and game theory. It also presents new ideas for further research. The first part deals with the economics of uncertainty, including a discussion of expected utility theory and non-expected utility theories, insurance market, portfolio analysis, principal-agent theory, as well as ethical issues presented in the context of choice under uncertainty. The second part develops an understanding of game theory as a tool for analysing the interactive decision-making process. At the core of microeconomic theory lie the economics of uncertainty and the economics of games and decisions. This text for undergraduates and specialists in mathematical economics links game theory with decision-making under uncertainty