Friedmann and Savage developed a model relating the shape of the utility function to income levels characterizing the "premium" associated with this phenomenon, and John Harsanyi argued that the cardinal utility function used in welfare economics was closely related to the cardinal utility function used in the theory of this phenomenon.  
Friedmann and Savage developed a model relating the shape of the utility function to income levels characterizing the "premium" associated with this phenomenon, and John Harsanyi argued that the cardinal utility function used in welfare economics was closely related to the cardinal utility function used in the theory of this phenomenon.  The tendency to avoid this phenomenon is estimated with ratio of the second derivative of the utility function to its first derivative in a model named for Arrow and Pratt; Markowitz's portfolio selection model identifies this with variance, while Frank Knight contrasted it with "uncertainty" by asserting that it could be measured. For 10 points, identify this concept from economics which indicates what an agent stands to lose or gain from an uncertain outcome, and which cautious people may be "averse" to.
Friedmann and Savage developed a model relating the shape of the utility function to income levels characterizing the "premium" associated with this phenomenon, and John Harsanyi argued that the cardinal utility function used in welfare economics was closely related to the cardinal utility function used in the theory of this phenomenon.  
{risk} [accept word forms like {risk}-{taking}]