For 10 points, identify this economic quantity representing the possibility of loss, which must be balanced with potential reward.
One theory of this concept notes that unjustified attention paid to small probabilities leads to a "fourfold pattern" of attitudes about this phenomenon. People's willingness to undergo this phenomenon is subject to a "reflection effect" based on the magnitude of its probability, according to the "prospect theory" developed by Kahneman and Tversky. The Arrow-Pratt coefficient measures the (*) "aversion" to this quantity, which can be considered identical to the valuing of certainty. The incentive to take on more of this quantity because costs are not borne by the same person who benefits is the moral hazard problem. For 10 points, identify this economic quantity representing the possibility of loss, which must be balanced with potential reward.
One theory of this concept notes that unjustified attention paid to small probabilities leads to a "fourfold pattern" of attitudes about this phenomenon.
risk