Risk attitude & economics

How do individuals make choices when faced with risk and uncertainty? If we adopt the point of view that their decisions are rational, we can model their attitude to risk.

Decisions in risky contexts are constantly being studied by researchers in the field of economics. This Viewpoint on industrial safety attempts to explain the fundamental economic theories, and their results, to people working in the domain of risk management, or who are interested in the subject.

The goal? To help everyone understand, from an economic point of view, the compromises made by an individual, and his or her attitude to risk. This document describes the fundamental findings that are used in economics, and that are understood to be the determinants of decision-making under conditions of risk or uncertainty, or in situations where potential losses and gains come into the equation.

To illustrate this topic, a selection of theoretical results is presented, interspersed with examples from everyday life, along with studies of risk perception drawn from economics and psychology.

| Contents |

• What is economics?
• Rational attitude to risk
• Discrepancies between the rational model and reality
• Other anomalies in risk attitude