 We differ in our attitudes to risk. Some of us willingly take risks which others deem much too large. The notion of certainty-equivalent outcomes can be used to specify such differences. Consider a risky outcome X. Another outcome Y is a certainty-equivalent outcome for X if and only if (1) Y involves no uncertainty and (2) X and Y are considered by the agent to be equally good. For instance, let X be a lottery ticket with a 50 per cent chance of winning something to which you assign 10 utiles (utility units) and a 50 per cent chance of winning nothing. The expected utility of this ticket is 5 utiles. Now suppose that you are indifferent between receiving 3 utiles for sure and receiving X. Then your attitude is risk averse. The general criterion for risk aversion (risk avoidance, cautiousness) is that \(CE(X) &lt; EU(X)\). Similarly, you are risk neutral concerning X if \(CE(X) = EU(X)\) and you are risk affine (risk seeking, risk loving) if \(EU(X) &lt; CE(X)\).