Discounted Expected Utility

For Baskets of Contingent Goods

Sergio O. Parreiras | Economics Department, UNC at Chapel Hill

ECON 510: Microeconomic Theory | Fall 2026

States of the World

The economy can be in one of three states:

Prior Probabilities

Discount factor: $\delta \in (0,1)$

Timeline

Information Revelation

As the modeler, specify what information is revealed at periods $t > 0$. We assume here that consumers know nothing at $t = 0$ but alternative assumptions are possible.

Contingent Markets Tree

Discounted Expected Utility