Decision-making under risk

Decision-making under risk involves choosing the best course of action when outcomes are uncertain but have known probabilities. It requires evaluating different options based on the potential gains or losses and how likely each is to occur. For example, an investor assessing whether to buy a stock considers potential returns against the chance of loss. This process helps in making informed choices that balance potential benefits with possible risks, often using tools like expected value or risk assessments to guide decisions logically and systematically.