International Journal of Economic Behavior and Organization
Volume 3, Issue 2-1, April 2015, Pages: 5-9
Received: Dec. 4, 2014;
Accepted: Dec. 9, 2014;
Published: Dec. 27, 2014
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Sándor Molnár, Institute of Mathematics and Informatics, Szent István University, Páter K. u.1., H-2100, Gödöllő, Hungary
Ferenc Szidarovszky, Department of Applied Mathematics, University of Pécs, Ifjúság u. 6, H-7624, Pécs, Hungary
The classical formula of certainty equivalent is reconsidered. Based on a modified proof of the original formula several alternative methods are derived with different orders of magnitude of their errors. This new method is then compared with the classical formula in a computer study showing the advantage of the new approach. Practical applications are also outlined to illustrate the methodology.
New Methods of Decision Making Under Uncertainty, International Journal of Economic Behavior and Organization. Special Issue: Recent Developments of Economic Theory and Its Applications.
Vol. 3, No. 2-1,
2015, pp. 5-9.
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