Presentasi Seminar Keuangan “The Utility Function of Choices Involving Risk”. Nama Kelompok : Matthew Gomies 37408003 Venny Dwiyanti 37408010 Inge Talia 37408018 Gentry DSG 37408039. Seseorang dapat mengurangi risk yang ada,misal insurance
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Presentasi Seminar Keuangan“The Utility Function of Choices Involving Risk”
NamaKelompok:
Matthew Gomies 37408003
VennyDwiyanti 37408010
Inge Talia 37408018
Gentry DSG 37408039
II. OBSERVABLE BEHAVIOR TO BE RATIONALIZED
1.Those involving little or no risk about the money return to be received :
2. Those involving a moderate degree of risk but unlikely to lead to either extreme gains or loss :
3. Those involving much risk, with some possibility of extremely large gain or loss :
-Ex : Jobs with physical risks, like pilot, automobile racing, law and medical profession, business undertaking in untried fields, securities like highly speculative stocks.
• The willingness of persons to buy insurance ; it shows that he/ she is accepting the certain loss of a small sum ( insurance premium ) in preference to the combination of a small chance of a much larger loss ( the house/ something insured ) and a large chance of no loss.
• The willingness of persons to purchase lottery tickets ; it shows that he / she is subjecting him/herself to a larger chance of losing a small amount ( the prize of the lottery ticket ) plus a small chance of winning a large amount ( a prize ).
III. Formal Hypothesis
In choosing among alternatives open to it , whether or not these alternatives involve risk, a consumer unit behaves as if :
Von Neumann and Morgenstern alternative statement of the same hypothesis is An individual chooses in accordance with a system of preferences which has the following properties :
Preferences among alternatives A and a riskless alternative B consisting of a certain income I0
U (A) = aU(I1)+ (1-a) U (I2)
I(A) = aI1 + (1-a)I2
and indeed U-U(I) may be taken to measure the utility it attaches to this particular risk.
Describing a conceptual experiment for determining the utility function.
To get the utility attached to any income outside the interval $500 to $1000, say $10,000 .
IV. Restrictions on Utility Function Required to Rationalize Observable Behavior
V. Digression
VI. Further Implications of The Hypothesis