Date of this Version
Cornhusker Economics August 24, 2016
Understanding how individuals make decisions when outcomes are risky is of significant interest to policymakers, economists, and businesses. The answer to questions such as why some drivers purchase the minimum legally allowable level of car insurance while others buy higher coverage, or why some producers buy the highest coverage available for crop insurance, while others do not purchase any insurance is that different people have different risk preferences. Risk preferences are varying attitudes or preferences toward different types of risks.