14.3 Reducing Risk
If most accidents occur in the home, why not live elsewhere?
Risk-averse people want to eliminate or reduce the risks they face. Risk-neutral people avoid unfair bets that are stacked against them, and even risk-preferring people avoid very unfair bets. Individuals can avoid optional risky activities, but often they can’t escape risk altogether. Property owners, for instance, know that their property may be damaged or stolen. However, they may be able to reduce the probability that bad events (such as earthquakes, tornadoes, fires, floods, and thefts) happen to them.
The simplest way to avoid risk is to abstain from optional ...
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