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Analyzing Consumer’s Behaviour in Risk and Uncertainty Situations

Author

Listed:
  • Daniela Elena Marinescu

    (Bucharest Academy of Economic Studies)

  • Dumitru Marin

    (Bucharest Academy of Economic Studies)

  • Ioana Manafi

    (Bucharest Academy of Economic Studies)

Abstract

In the paper we will generalize the Slutsky Equation in risk and uncertainty situations using the compensated and uncompensated demand and some local measures of risk aversion. We will obtain a nonlinear optimization problem of maximizing the expected utility; this problem will be solved using the Kuhn-Tucker method. We use the results to analyze the income and substitution effects of price changes on demand in risk and uncertainty conditions.

Suggested Citation

  • Daniela Elena Marinescu & Dumitru Marin & Ioana Manafi, 2011. "Analyzing Consumer’s Behaviour in Risk and Uncertainty Situations," International Journal of Economic Practices and Theories, Academy of Economic Studies - Bucharest, Romania, vol. 1(2), pages 51-57, September.
    • Handle: RePEc:aes:ijeptp:v:1:y:2011:i:2:p:51-57
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    More about this item

    Keywords

    Compensated demand; risk aversion; Slutsky Equation; uncertainty; uncompensated demand;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets

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