The Economics of Risk and Time
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The Economics of Risk and Time

By Christian Gollier





This book updates and advances the theory of expected utility as applied to risk analysis and financial decision making. Von Neumann and Morgenstern pioneered the use of expected utility theory in the 1940s, but most utility functions used in financial management are still relatively simplistic and assume a mean-variance world. Taking into account recent advances in the economics of risk and uncertainty, this book focuses on richer applications of expected utility in finance, macroeconomics, and environmental economics.

The book covers these topics: expected utility theory and related concepts; the standard portfolio problem of choice under uncertainty involving two different assets; P the basic hyperplane separation theorem and log-supermodular functions as technical tools for solving various decision-making problems under uncertainty; s choice involving multiple risks; the Arrow-Debreu portfolio problem; consumption and saving; the equilibrium price of risk and time in an Arrow-Debreu economy; and dynamic models of decision making when a flow of information on future risks is expected over time. The book is appropriate for both students and professionals. Concepts are presented intuitively as well as formally, and the theory is balanced by empirical considerations. Each chapter concludes with a problem set.


Out of Print ISBN: 9780262072151 445 pp. | 9 in x 6 in 54 illus.


$49.00 X | £38.00 ISBN: 9780262572248 445 pp. | 9 in x 6 in 54 illus.


  • Presents a unified and up-to-date analysis of the expected utility model.

    Journal of Economic Literature


  • Christian Gollier, one of the foremost contemporary researchers on the economics of uncertainty, has written an instant classic. this path-breaking book weaves with dazzling mastery the common thread of the economics of risk and time through microeconomic theory, macroeconomics, and finance. This is a feat no one has accomplished before. This book is therefore a must read for a broad audience: graduate students in economics and finance, superior undergraduates, and researchers will all find it a source of knowledge and inspiration.

    Philippe Weil

    Professor of Economics and Co-Director, European Centre for Advanced Research in Economics and Statistics, Universite Libre de Bruxelles

  • Gollier's treatise on risk and time will be the bible for future finance theory and practice. Get your copy; read and reread. Keep ahead of the competitive mob.

    Paul A. Samuelson


  • An authoritative, state-of-the art compendium on expected utility, the savings/portfolio choice problem, and much more.

    Jacques Dreze

    Center for Operations Research and Econometrics (CORE), Université catholique de Louvain, Belgium

  • Christian Gollier offers a lucid and comprehensive treatment of the theory of expected utility. He clarifies the deep structure of the theory, and systematically explores the connections between observed decisions and the preferences that generate them. This book will be an invaluable resource for students of choice under uncertainty.

    John Y. Campbell

    Department of Economics, Harvard University


  • Winner, 2003 Kulp-Wright Book Award from the American Risk and Insurance Association (ARIA)