Certainty Equivalent

The certain and sure money or utility ('sure thing') that a subject would have to receive to be indifferent between it and a given gamble ('uncertain prospect') is called the gamble's 'certainty equivalent'. The certainty equivalent is less than the expected value of the gamble if an individual has a diminishing marginal utility of money income and obeys the axioms of expected utility theory. This indicates a kind of risk aversion. In health economics, the usual experiment contains a certain outcome, such as five years of healthy life, and an uncertain prospect consisting of the combination of two or more uncertain outcomes such as probability p of having two years of healthy life and probability (1 - p) of having 15 years of healthy life. P is then experimentally adjusted until there is indifference.

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100 Health Tips

100 Health Tips

Breakfast is the most vital meal. It should not be missed in order to refuel your body from functional metabolic changes during long hours of sleep. It is best to include carbohydrates, fats and proteins for an ideal nutrition such as combinations of fresh fruits, bread toast and breakfast cereals with milk. Learn even more tips like these within this health tips guide.

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