IDEAS in AGORA: Decision-Making Risk: The Difference Between Risk And Uncertainity In Economic Activities

• Published in: Human and Social Studies Vol. 3; no. 2; pp. 34 - 46
• Main Authors: Vasilcovschi, Nicoleta, Munteanu, Gabriela
• Format: Journal Article
• Language: English
• Published: De Gruyter Open 01.06.2014
• Subjects: Assumed risk; Asymmetry; Decision-making risk; Decisions; Monte Carlo simulation; Risk aversion; Uncertainty
• ISSN: 2285-5920; 2285-5920
• DOI: 10.2478/hssr-2013-0028

Economic activities are always supposed to carry with them the risk of market. Our area of research is concerned with what is known as the model of risk decisions at the level of economic activity; a model that can be valuable at any point of economic development. In our research, we present important aspects of risk in taking decisions in the previous and current dynamics of the market. The conditions of taking decisions with potential risks provide decision-makers with the possibility to analyze and calculate risk in order to know what can be gained and lost. In our paper, we present a short description of a different model of risk in economic activity and of decision-making risk, providing examples that have been offered by various authors. For example, Friedman and Savage present the utility function of an economic agent and its availability to accept the risk, while Markowitz defines utility in terms of winning or losing. Our paper starts with a presentation of the quantification of risk in economic activity. In the second part, we present a model of decision-making risk that is applied in economic activities and the difference between risk and uncertainty.