Abstract
An agent, perhaps an individual or a firm, is said to be risk averse if the agent prefers a deterministic outcome equal to the expectation of a risky outcome over that risky outcome. Risk aversion seems to be a common characteristic; introspection suggests as much. More importantly, it gives qualitative explanation to economic behaviour in many instances where risk is present. If individuals and firms were not risk averse, insurance markets would not exist. Needless to say, there are activities which are inconsistent with agents being risk averse. Gambling is perhaps the best example of such an activity.
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Werner, J. (2018). Risk Aversion. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95189-5_2741
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DOI: https://doi.org/10.1057/978-1-349-95189-5_2741
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