16.3 Reducing Risk
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, always face the possibility that their property will 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.
Individuals can avoid optional risky activities, but they can’t escape risk altogether. Property owners, for instance, face the possibility that their property will be damaged or stolen or will burn ...
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