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An Improvement to Jensen's Inequality and its Application to Mating Market Clearing when Paternity is Uncertain

Dirk Bethmann

No 1506, Discussion Paper Series from Institute of Economic Research, Korea University

Abstract: Jensen's inequality can be tightened in the context of binomially distributed random variables. The suggested new inequality coincides with Jensen's inequality only when the expected value of the random variable is an integer, in all other cases the inequality is tighter than Jensen's. This improvement is used to derive a welfare result in the context of a mating market where male agents are exposed to paternal uncertainty. It is shown that social welfare is highest when paternity is certain, a result that can not be obtained when relying on Jensen's inequality.

Keywords: Expected Utility; Binomial Distribution; Jensen's Inequality; Mating Market; Uncertain Paternity (search for similar items in EconPapers)
JEL-codes: C65 J11 J13 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-upt
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