Warwick Economics Working Paper Series
Our Working Papers series feature new ideas and research from academics within the Department of Economics.
The vast majority of papers are available online, the early of which is from 1975. If a paper is unavailable online, hard copies can be requested free of charge. If you wish to obtain a copy, please contact Helen Knight, quoting the Research Paper number.
|Catastrophic risk, rare events, and black swans are phenomena that require special attention in normative decision theory. Several papers by Chichilnisky integrate them into a single framework with finitely additive subjective probabilities. Some precursors include: (i) following Jones-Lee (1974), undefined willingness to pay to avoid catastrophic risk; (ii) following Rényi (1955, 1956) and many successors, rare events whose probability is infinitesimal. Also, when rationality is bounded, enlivened decision trees can represent a dynamic process involving successively unforeseen “true black swan” events. One conjectures that a different integrated framework could be developed to include these three phenomena while preserving countably additive probabilities. [read more]||1059|