Ambiguity Aversion Vs. Risk Aversion
The distinction between ambiguity aversion and risk aversion is important but subtle. Risk aversion comes from a situation where a probability can be assigned to each possible outcome of a situation. Ambiguity aversion applies to a situation when the probabilities of outcomes are unknown (Epstein 1999). The main idea behind ambiguity aversion encompasses the idea of risk aversion. A real world consequence of increased ambiguity aversion is the increased demand for insurance because the general public are averse to the unknown events that will affect their lives and property (Alary, Treich, and Gollier 2010).
Read more about this topic: Ambiguity Aversion
Famous quotes containing the words ambiguity, aversion and/or risk:
“Indeed, it is that ambiguity and ambivalence which often is so puzzling in women—the quality of shifting from child to woman, the seeming helplessness one moment and the utter self-reliance the next that baffle us, that seem most difficult to understand. These are the qualities that make her a mystery, the qualities that provoked Freud to complain, “What does a woman want?””
—Lillian Breslow Rubin (20th century)
“When in a serious mood, it seems to me that those people are illogical who feel an aversion toward death. As far as I can see, life consists exclusively of horrors, unpleasantnesses and banalities, now merging, now alternating.”
—Anton Pavlovich Chekhov (1860–1904)
“Any time you take a chance you better be sure the rewards are worth the risk because they can put you away just as fast for a ten dollar heist as they can for a million dollar job.”
—Stanley Kubrick (b. 1928)