Defined terms for the annuity market and lifetime income landscape.
Ergodicity is the property of a system in which the average outcome experienced by a single participant over time equals the average outcome across many participants at any given moment, allowing time-averaging and ensemble-averaging to produce the same result.
Ergodicity economics is the analytical framework, developed primarily by Ole Peters, that examines economic systems through the distinction between time-average outcomes — what a single agent experiences over time — and ensemble-average outcomes — what a population experiences at a single moment.
Expected utility theory is the dominant framework in economics for decisions under uncertainty — the idea that a rational decision-maker weighs each possible outcome by both its probability and its perceived value, and chooses the option with the highest weighted total.
The expected value paradox is the broader class of decision puzzles — of which the St. Petersburg paradox is the established case — in which a conventional expected-value calculation produces a recommendation no reasonable individual would accept.
A fat-tailed distribution is a probability distribution in which extreme outcomes — very large or very small results — happen more often than common intuition or the bell-curve normal distribution would suggest, so that rare large events are not as rare as they look.
