Tuesday, August 22, 2006

A little noise to nudge people into taking risk

http://books.global-investor.com/books/23007.htm?ginPtrCode=10202&identifier=bbd1b3537d09ae2e36b5010dd505b3ec

I listened to Aaron Brown present his idea that for an exchange to be efficient the deals need to be incentivised with a chance of large payouts. This makes sense to me, what is more motivating: Getting the average every times or getting a random return but with the chance of a high value? I think human nature cannot accept the hard reality of what an average return implies and naturally will search for risk in order to give him a chance for a better return.

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