March 24th, 2009

Risk and Risky


Ruchika

I just wanted to note this conversation I had with a dear friend of mine a few days ago.. Seemed like a very interesting conversation to just forget about.. 

kirti: I was thinking about this.. 

  risk.. 

  what makes risk so risky... 

  is it uncertainity

  or is it the stakes are high.. 

  or is it something else.. 

me: its the adrenaline.. of when things start going topsy turvy.. and when you put in all you got to make it work your way .. 

  the excitement then ..

  and then when it works out.. you boast about having taken a calculated risk...

Found this something I should remember.. and keep a note of.. 

 

Posted by Ruchika at 07:49 PM | 1 comments
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Comment posted on August 28th, 2009 at 12:54 AM
This is a plain utilitarian principle. The utility theory tells that people act as if the dollar they stand to gain in a fair bet is worth less to them than the dollar they stand to lose. This means that they are averse to risk and that successive new dollars of wealth bring them smaller and smaller increments of true utility. This is also the foundation of modern economics theories like law of diminishing marginal utility... which supports the downward sloping demand curve...
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