At 05:12 PM 11/1/2006, [EMAIL PROTECTED] wrote: >This is why insurance companies exist. People pay say 1% >of the value of a thing in order to insure against a risk >that is say 1 in 200 of happening. The expected benefit of >the insurance is less than the cost, but it is still worth >getting.
It would be more accurate to say that people are willing to pay to avoid risk, and sometimes they are willing to pay more than the expected cost of the risk. Insurance is like gambling in some ways. The insurance company is the House. It is also making the same bet on the other side. It is willing to accept a large risk for a small positive expectation. Plus it gets to invest the reserves.... (You have to have reserves to play this game. But the reserves can be invested, they do not have to be sitting in a no-interest checking account....) Yes, risk aversion is a known behavioral pattern. It is not necessarily rational, which is why I object to "it is still worth getting." Sometimes it is, sometimes it is not. If you can absorb the loss, it is *not* worth getting by any rational standard. There is one argument for insurance. If you are going to worry, worry is bad for your health. If you can't find a way to avoid worrying, one could consider insurance as a palliative treatment for your anxiety disorder.... Or insurance is worth getting if for some reason you expect higher than average losses. Which might be fraud, under some circumstances. >In any case, on the topic at hand. I think that >there would be people in an election who wouldn't >vote perfect strategic because they are afraid that >their least favorite will win. And this is good. I suspect that if you do a risk analysis, you'd find that optimizing the average value of the election would indicate not voting pure favorite-win strategy, as long as there is another candidate reasonably close in preference. ---- election-methods mailing list - see http://electorama.com/em for list info
