OIDD 261 Lecture Notes - Lecture 9: Kyoto Protocol, Marginal Cost, American Cancer Society
1 Jun 2018
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Notes on Slides 15:
Strategies for Dealing with Extreme Events
Key Points:
• Process models of choice
• Linking risk management strategies to risk assessment and risk perception
• Need for public-private partnerships
Nature of Problem:
• Low probability event defined differently by individual and society
• Automobile accidents
• Leakage from radioactive waste sites
• Preferences and values are vague, labile and incoherent
• Limited past experience, values not thought through
• Disagreements between experts
Descriptive Features:
• Experts disagree on chances and potential consequences
• Individuals utilize simplified decision rules
• Individuals exhibit systematic biases
Biases in Probability Judgments:
• Availability -- Bhopal disaster
• Optimism bias -- world’s finest driver
• Treat low probabilities as zero probabilities -- flood hazard
Process Models
• Contingent weighting models
• Pre-accident and post-accident behavior
• Threshold models (it cannot happen to me)
Other factors Influencing Choice
• Ambiguity matters
• Worst case scenarios
• Importance of other attributes
• Emotion dimensions
• Concern for future generations
Problem Types:
Problem Type 1: It cannot happen to me
• Risk management strategy:
• stretching time horizon
• Require insurance as condition for a mortgage
Problem Type 2: I am in control
• Risk Management Strategy:
• Insurance is default (seatbelts)
• Provision of information--making risk salient and changing probability reference
point
• Economic incentives: insurance premium reduction
• Regulations and fines
Problem Type 3: Myopic Behavior
• Risk Management Strategy:
• Economic incentives (low interest loans)
• Well-enforced building codes
Problem Type 4: Concern for my great great grandchildren
• Risk Management Strategy:
• Provision of information on risk
• Mitigation and control measures
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Key points: process models of choice, linking risk management strategies to risk assessment and risk perception, need for public-private partnerships. Nature of problem: low probability event defined differently by individual and society, automobile accidents, leakage from radioactive waste sites, preferences and values are vague, labile and incoherent, limited past experience, values not thought through, disagreements between experts. Descriptive features: experts disagree on chances and potential consequences. Biases in probability judgments: availability -- bhopal disaster, optimism bias -- world"s finest driver, treat low probabilities as zero probabilities -- flood hazard. Process models: contingent weighting models, pre-accident and post-accident behavior, threshold models (it cannot happen to me) Other factors influencing choice: ambiguity matters, worst case scenarios. Importance of other attributes: emotion dimensions, concern for future generations. Problem type 1: it cannot happen to me: risk management strategy, stretching time horizon, require insurance as condition for a mortgage. Problem type 2: i am in control: risk management strategy:
