New study reveals why we're more risk averse than we think
Risk aversion in decision-making can be explained by a mental bias rather than a complex mathematical formula. People tend to avoid risks due to imprecise mental representations of the situation, leading to suboptimal choices in small gambles. This bias is similar to how our perceptions can be influenced by noise. The study suggests that our decisions are based on imperfect mental representations, which can explain why people are more risk-averse than expected in certain situations.