STOCHASTIC

CONSUMPTION UNDER UNCERTAINTY 335
Accordingly, this "mean effect" will reinforce the "variance effect" whenever
d 2 (U1/Ui)/8c2 i < 0, establishing unequivocally the superiority of c/
over tt ; but it will work in opposite direction when d\UxllJ^jdc^ > 0.
Theorem 3.3 may be interpreted as showing that the "variance effect"
vanishes at Ci*, through optimal choice of the prospect ; the sign of
^ — cx* is then determined by the "mean effect", i.e., by the sign of
cHUJUJ/ScS.
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486 PART V. DYNAMIC MODELS