We have seen textbook descriptions of choice amongst firms and amongst consumers. Let’s discuss choice in the presence of risk, and in the presence of uncertainty.
Uncertainty has been the watch word of this module to date. The firm exists in a sea of the stuff, people don’t really maximise their utility subject to their budget constraints because of it, and instead form simple rules based on their previous experiences.
In this lecture we'll talk about the distinction between risk and uncertainty, and some mechanisms to deal with both.
Economics for Business Lecture 5 from Stephen Kinsella on Vimeo.