In the last few decades, economists have puzzled over the curious phenomenon of so-called ambiguity-averse preferences. You are indifferent between (A) receiving a cash prize if a coin lands heads, and (B) receiving the prize if a coin lands tails. You are also indifferent between (A*) receiving the prize if the Nikkei stock index goes up and (B*) receiving the prize if it goes down; for you are totally ignorant about the Japanese stock market. But you prefer (A) to (A*), and you prefer (B) to (B*). Thus, intuitively, you prefer gambling on the more familiar toss of a coin than on the less familiar stock market.
http://www.thebsps.org/wp-content/uploads/2018/08/spotlight.png 788 940 Elizabeth Hannon http://www.thebsps.org/wp-content/uploads/2015/06/BSPS-blue.gif Elizabeth Hannon2014-07-02 09:00:002019-02-18 22:10:26The Mysterious Methodology of Rational Choice Theory | Christopher Clarke