Note that, when η = 0, ci is simply the expected income of i. We then calculate the inequality-neutral certainty-equivalent income loss. To do this, we find the equalpercentage loss that, if forfeited by all agents with certainty, yields the same welfare as the actual crosssectional distribution of certainty equivalent losses ci . Denoting the inequality-neutral certainty-equivalent income loss...

This paper attempts to determine the certainty equivalent of an uncertain future cash flow or value through the option pricing method, and builds models of certainty equivalent and certainty equivalent coefficient. Based on the model of certainty equivalent coefficient, this paper further derives models of risk premium and risk-adjusted discount rate. The latter is a new capital asset pricing m...

In this paper, we consider the relationship between supermodularity and risk aversion. We show that supermodularity of the certainty equivalent implies that the certainty equivalent of any random variable is less than its mean. We also derive conditions under which supermodularity of the certainty equivalent is equivalent to aversion to mean-preserving spreads in the sense of Rothschild and Sti...

The development of a non-certainty-equivalent adaptive control system for the control of a nonlinear aeroelastic system is the subject of this paper. The prototypical aeroelastic wing section considered here includes structural nonlinearity and a single control surface for the purpose of control. Its dynamical model has two-degree-of-freedom and describes the plunge and pitch motion. It is assu...

In a recent paper, Newell and Pizer (2003) (N&P) build upon Weitzman (1998, 2001) and show how uncertainty about future interest rates leads to ‘certainty equivalent’ forward rates (CER) that decline with the time horizon. Such Declining Discount Rates (DDR’s) have important implications for the economic appraisal of the long-term policy arena (e.g. climate change) and inter-generational equity...