Abstract
In order to take a decision in an uncertainty context, it is necessary, from a theoretical point of view, to build a model and specify all the consequences in every possible state of the world. In applied work this method is much too involved. Consequently, for applied purposes, it would be interesting to have a model where uncertainty is treated in such a way that the decision problems are as simple as the equivalent ones in a certainty framework. The identification of the conditions under which such an isomorphism between the optimal decisions under uncertainty and the optimal decisions in an equivalent certainty context holds is called the certainty equivalent problem.
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© 1990 Palgrave Macmillan, a division of Macmillan Publishers Limited
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Freixas, X. (1990). Certainty Equivalent. In: Eatwell, J., Milgate, M., Newman, P. (eds) Utility and Probability. The New Palgrave. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-20568-4_6
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DOI: https://doi.org/10.1007/978-1-349-20568-4_6
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-0-333-49541-4
Online ISBN: 978-1-349-20568-4
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