Abstract
The phenomenon of risk (or alternatively, uncertainty or incomplete information) plays a pervasive role in economic life. Without it, financial and capital markets would consist of the exchange of a single instrument each period, the communications industry would cease to exist, and the profession of investment banking would reduce to that of accounting. One need only consult the contents of any recent economics journal to see how the recognition of risk has influenced current research in economics. In this essay we present an overview of the modern economic theory of the characterization of risk and the modelling of economic agents’ responses to it.
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© 1990 Palgrave Macmillan, a division of Macmillan Publishers Limited
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Machina, M.J., Rothschild, M. (1990). Risk. In: Eatwell, J., Milgate, M., Newman, P. (eds) Utility and Probability. The New Palgrave. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-20568-4_30
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DOI: https://doi.org/10.1007/978-1-349-20568-4_30
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