Certainty Equivalence Procedures in Decision-Making Under Uncertainty: An Empirical Application

Content Provider	Semantic Scholar
Author	Aslaksen, Iulie Bjerkholt, Olav
Copyright Year	1985
Abstract	Publisher Summary This chapter discusses the certainty equivalence procedure in decision making under uncertainty. The application of certainty equivalence procedures is a useful method for simplifying a decision problem involving uncertainty. In the theory of economic policy and planning, certainty equivalence procedures have mainly been elaborated in the case of a quadratic objective function combined with a linear structural model. The idea is to formulate a procedure for optimal decision-making under uncertainty, which is similar to the one that would be valid in the case of full certainty by permitting an appropriate adjustment of the parameters of the objective function. Apart from the well-known linear-quadratic case, it is not easy to obtain certainty equivalence procedures; however, one may obtain parametric certainty equivalence where the parameters of the objective function are adjusted in a prescribed way to take uncertainty into account.
Starting Page	289
Ending Page	329
Page Count	41
File Format	PDF HTM / HTML
DOI	10.1016/B978-0-444-87838-0.50017-5
Volume Number	154
Alternate Webpage(s)	https://www.econstor.eu/bitstream/10419/191989/1/dp005.pdf
Alternate Webpage(s)	https://doi.org/10.1016/B978-0-444-87838-0.50017-5
Language	English
Access Restriction	Open
Content Type	Text
Resource Type	Article