Divergence between individual perceptions and objective indicators of tail risks: Evidence from floodplain residents in New York City

Wouter Botzen, Howard Kunreuther and Erwann Michel-Kerjan

Judgment and Decision Making, 2015, vol. 10, issue 4, 365-385

Abstract: This study provides the first comprehensive analysis of individual perceptions of tail risks. It focuses not only on the probability, as has been studied by Nicholas Barberis and others, but also on anticipation of damage. We examine how those perceptions relate to experts’ estimates and publicly available risk information. Behavioural factors—availability bias, threshold models of choice, worry and trust—are found to have a significant impact on risk perceptions. The probability of tail events is overestimated, which is consistent with probability weighting in prospect theory. Potential damage is underestimated, one reason why individuals do not invest in protective measures.

Date: 2015
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.cambridge.org/core/product/identifier/ ... type/journal_article link to article abstract page (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cup:judgdm:v:10:y:2015:i:4:p:365-385_7

Access Statistics for this article

More articles in Judgment and Decision Making from Cambridge University Press Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK.
Bibliographic data for series maintained by Kirk Stebbing ().