Risk-averse

When the most common waterside or steamside interactions and resulting cause-and-effect problems that may develop have been anticipated and suitable water treatment risk aversion protocols proposed... 

To sum up, the factors that enable the supply side to fix prices above the marginal cost are (a) the imperfect agency relationship between the doctor (the agent) and the insurer (the principal) the prescriber may prefer the brand product, about which he or she has acquired knowledge and experience during the patent period (risk aversion), (b) the patient, and sometimes also the doctor, may have imperfect information on the quality of cheaper alternatives, and (c) the lack of incentives to change prescription habits (moral hazard). 

Voluntary insurance would be the market solution to uncertainty for risk-averse individuals. In this context, the user chooses the optimum co-insurance rate. Theory offers some analytical results on optimal health insurance contract designs.1 The consumer decides the extent of the coverage and the optimum co-insurance rate, and ultimately the price to be paid for the premium. In competitive markets, with actuarially fair premiums, the optimum co-insurance rate varies between individuals and depends on the risk of falling sick and the price elasticity of demand. 

In an era of escalating health care costs, "inputs" to the production of health care, such as pharmaceuticals, physician visits, laboratory/diagnostic services, and hospital care, are often viewed in isolation from each other as if one sector of the health care economy can be optimized independent of the others. When cost containment is the primary economic objective, a shortterm, risk-averse decision rubric emerges. 

When risk-averse consumers perceive risk, they will exhibit risk management behavior (behavior that decreases risk exposure). However, when riskseeking consumers perceive risk, they will exhibit risky behavior or seek out ways to increase their risk (because of the corresponding payoff). The interaction between risk attitude and risk perception represents how one intends to cope with risks in the channel combined with the risks their actions generate. 

As noted earlier, risk perception reflects a consumer s interpretation of the likelihood they will be exposed to the illness or disease. Risk attitudes reflects a consumer s general predisposition to risk in a consistent way. Some people are risk averse whereas others are not. That is one reason why all people in the world do not skydive, ride motorcycles without helmets, or hang glide. It is important to emphasize that risk attitude and risk perception are two different concepts (Pennings and Wansink, 2005). Whereas risk attitude deals with a consumer s interpretation of the content of the risk and how much he or she dislikes the risk, risk perception deals with the consumer s interpretation of the likelihood of being exposed to the content of the risk. 

The low-risk aversion-low-risk perception profile corresponds to consumers who are risk seekers. They view themselves as accountable for their own behavior and what results from it. They ignore any available information... 

FIG. 10 Four profiles of consumers according to risk perception and risk aversion levels. 

Risk-seeking consumers Risk-averse consumers... 

This is the low-risk aversion-high-risk perception segment. The concerned segment has the risk of most behaviors in perspective. Because they are not risk averse to begin with, their behavior is dictated primarily by their perception of risk. As their perception of the riskiness of an action increases, they will eventually get to a point where they will not participate in the action at all. 

This consists of high-risk aversion-low-risk perception consumers. The conservative segment is composed of cautious, risk-averse consumers who do not take any unnecessary risks. They can also be seen as being the silent majority in many ways (Miller, 1985). 

This high-risk aversion-high-risk perception profile corresponds to risk-averse consumers. This alarmist segment is composed of people who are prone to overreacting to many situations (Radovanovic, 1995). They are also the most assertive in their tendency to become politically involved or to actively attempt to influence others. 

Consumer segment risk aversion/risk perception Passive vs aggressive responses Irrational vs rational responses Short- vs long-term responses... 

Consumers accept technology for medicinal purposes, but not necessarily for foods. These different attitudes toward medicine and food can be explained by the way the situation is framed—or perceived—by consumers. As Kahneman and Tversky (1986) have shown, people show a risk-taking tendency when the outcome is seen as the reduction of a loss ( I do not want to be sick ), but show a risk-aversive tendency when the outcome is identified as a gain ( I want to be healthy ). 

In the considered value chain planning problem, the uncertainty of spot sales prices impacts the profitability of the overall value chain plan, since volume decisions can lead to profit-suboptimal plans, if the average sales price cannot be realized as planned. Therefore, price volatility is considered as an external (stochastic) influence in the considered value chain planning problem. The following model extensions account for this uncertainty and try to derive methods to achieve more robust plans with respect to profit results with contributions from Habla (2006). The objective of the proposed modeling approach is to maximize profit for the entire value chain network. It is assumed that the company behaves risk-averse in face of the price uncertainty. 

It is noteworthy that in this broader context of decision making, the conservative behavior of scientists who use conventions as if they were rules of nature constitutes a paradox. On the one hand, they usually demand odds overwhelmingly against the null hypothesis before concluding it is false, and therefore behave as a risk-aversive group reluctant to gamble personal and collective reputations. On the other, many behave as risk-takers and are often willing, collectively or individually, to loose major health and environmental risks upon the public. 

Nevertheless, there is a growing concern that the FDA is becoming more risk-averse, resulting in more requirements for pre-approval safety testing, more delays in drug approvals and more restrictions on post-approval use of drugs. 

Consideration of the expected value of profit alone as the objective function, which is characteristic of the classical stochastic linear programs introduced by Dantzig (1955) and Beale (1955), is obviously inappropriate for moderate and high-risk decisions under uncertainty since most decision makers are risk averse in facing important decisions. The expected value objective ignores both the risk attribute of the decision maker and the distribution of the objective values. Hence, variance of each of the random price coefficients can be adopted as a viable risk measure of the objective function, which is the second major component of the MV approach adopted in Risk Model I. 

However, the primary difficulty in executing model (6.14) is in determining a suitable set of values for 0, that caters to decision makers who are either risk-prone or risk-averse. An approach to circumvent this problem is available in which the variance (or the standard deviation) of the objective function is minimized as follows ... 

However, as mentioned in the previous section, the stochastic model takes a decision based on first-stage and expected second-stage costs, and, hence, does not account for the decision-maker risk behavior (risk-averse or risk taker). For this reason, a more realistic approach would consider higher moments where the tradeoff between the mean value and the variations of different scenarios is appropriately reflected. 

Regardless of what institutions govern human exposure to chemicals, residual exposure will exist. Risk-averse individuals will want to share that risk through insurance. Chapter 5 explains the operation of insurance markets, particularly environmental insurance markets. The federal "Superfund" program and certain court decisions have made insurers reluctant to write environmental insurance contracts. Until Congress and the courts stop confiscating wealth through arbitrary statutes and common-law decisions, the environmental liability insurance market will not work well. 

Product liability Litigation with Risk Aversion. Journal of Legal Studies... 

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