Introduction

Abstract

Almost every mode of economic behaviour is influenced by uncertainty. The farmer faces uncertainty about weather as well as the product price; the entrepreneur in a mechanised industry is not affected that much by the vagaries of weather, but he may have to cope with the vagaries of his employees, plant breakdown or even the possibilities of a strike; the number of customers coming to a store on any day is random; at the country level, the foreign demand for its products may be stochastic, or the foreign supply of raw materials may be random. Thus, uncertainty affects virtually every aspect of economic life. Yet, it is only recently that the economist has begun to analyse the economic decision-making of individuals under conditions of uncertainty. In view of the general stochastic nature of the economic milieu, it is not easy to explain the long neglect of integration with deterministic economic models of the theory of probability, which furnishes the analytical tools needed to investigate the individual behaviour under a probabilistic economic environment.