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).
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Famous quotes containing the words ambiguity, aversion and/or risk:
“Legends of prediction are common throughout the whole Household of Man. Gods speak, spirits speak, computers speak. Oracular ambiguity or statistical probability provides loopholes, and discrepancies are expunged by Faith.”
—Ursula K. Le Guin (b. 1929)
“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)
“Combining paid employment with marriage and motherhood creates safeguards for emotional well-being. Nothing is certain in life, but generally the chances of happiness are greater if one has multiple areas of interest and involvement. To juggle is to diminish the risk of depression, anxiety, and unhappiness.”
—Faye J. Crosby (20th century)