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Risk and our consumption choices

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Johan Fourie is associate professor in economics at Stellenbosch University.
Johan Fourie is associate professor in economics at Stellenbosch University.

These large differences in mortality risk allow economists to investigate a central question to discipline: to what extent does risk affect our behaviour? The homo economicus of first-year textbooks, in which consumers rationally maximise utility, has over the last three decades come under attack (and often ridicule) for the naive way it interprets human behaviour.

Making such rational decisions is especially difficult in low-probability settings, like natural disasters or terrorism. But given that rare events are by construction, well, rare, how do we study their effect on consumer behaviour systematically?

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