Risk

In economics, risk is the potential for deviation (loss or gain and failure or success) associated with a particular decision or investment. It is the possibility that the outcome of a chosen course of action will (not) be as expected or desired, leading to negative (positive) consequences such as financial loss (gain) or missed (attained) opportunities. Risk is a fundamental concept in economics as it influences decisions made by individuals, businesses, and governments regarding investment, production, and consumption. Factors contributing to risk include uncertainty, variability, and external factors beyond one’s control. Managing risk is an essential part of economic decision-making and involves diversification, insurance, and hedging strategies.

Risk-Sharing and the Corona Pandemic

How can risk-sharing help resolve the Corona Pandemic? Corona Pandemic is a global health risk that all economies face together. However, the more each country seeks to solve the COVID19 crisis independently, the more all countries seem to lose control of the situation at society’s global, national, and local levels. The Corona Pandemic is a Global Health Shock The Corona Pandemic is a global health shock with a globally differentiated local impact that hit every corner of this earth. We can describe the impact of COVID-19 as an asymmetric shock on households, firms, and sectors within and across the world. […]

Rational Decision under Uncertainty

By James E Njoroge, M. Sc. (VWL) - Economic Coach, Consultant and Lecturer / November 8, 2021 / Foundations of Economics, Behavioral Economics, Economics, Economics of Pandemics, Health risks, Leadership and Management, Personal Finance

Rational Decision under Uncertainty Read Post »

How would an individual make a rational decision under uncertainty? This article explains how economists characterize decision-making under uncertainty. Economic models always focus first on decisions under certainty and then introduce uncertainty later in the learning process. The focal point here is how this affects the rationality of agents’ decisions to use scarce resources. 1. Introduction to Rational Decision under Uncertainty We are all faced with daily situations where we have to make decisions that will lead to different outcomes immediately or later. Such decisions occur under uncertainty of results. Economic theory explains this problem in the models of decision-making

Certainty Equivalent, Expected Value, Fair Insurance, Fairness, Insurance Premium, Rational, Rational Decision, Risk, Risk Premium, Uncertainty, Unfair Insurance

Risk

Risk-Sharing and the Corona Pandemic

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Rational Decision under Uncertainty

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