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Intro Econ 8: Risk & Disaster

Planet Money Summer School

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Incentives Drive Choices, Risks Shift Costs

Optimizing personal decisions often appears immoral, yet companies engaging in profit maximization face similar judgments. Individuals tend to avoid costly actions without personal benefits, focusing instead on the return of investment. When insurance structures incentivize healthy behavior, such as gym attendance to lower medical costs, they illustrate a rational approach to risk management. Personal experiences, like opting for full insurance on a risky rental car venture, emphasize how risk perception heavily influences decisions. Ultimately, both individuals and corporations navigate risk by assessing potential benefits versus costs, revealing the complexities of decision-making within competitive frameworks.

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