Supplementary Exercises > Choice and Cost Benefit Analysis

Uncertainty and Expected Value

Most of these also involve present value calculations. All have solutions available.

Fuel cell research under uncertainty: Includes calculations of the value of perfect and imperfect information.
Gambling on the World Series: Straightforward analysis of a gamble.
Global warming: A stylized version of a real policy problem involving both uncertainty and long spans of time.
Insurance and pooling of risks: Illustrates the "adverse selection" problem that lies behind the common requirement of employer-sponsored health insurance plans that everyone must participate.

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Peter J Wilcoxen, The Maxwell School, Syracuse University
Revised 12/10/2004