Economic Perspectives II

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Conclusion

In the real world, few agents are perfectly risk-neutral. Most individuals, groups, and companies employ risk-related considerations as a part of the decision-making process. As we just observed, this leads to sub-optimal performance in an uncertain environment. When such agents receive information in the form of lowered option variances, their overall behavior becomes closer to that of a risk-neutral agent, and the total output approaches maximum.

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