risk aversion
/ˈrɪsk əˌvɜːrʒən/
preference for certainty over gambles with equal expected value
risk aversion in a sentence
“Risk aversion explains why people buy insurance.”
Origin of risk aversion
From risk + aversion (Latin aversio turning away)
Related Words
risk neutral
indifference between certain outcomes and gambles of equal expected value
sunk cost
a past cost that cannot be recovered
opportunity cost
the value of the best alternative forgone
marginal utility
the additional satisfaction from consuming one more unit
diminishing returns
decreasing incremental output as input increases
pareto optimal
a state where no one can be made better off without making another worse off