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The Market for Tornado Safety: Analysis of Applications to the Oklahoma Saferoom Initiative

Author

Listed:
  • David Merrell

    (University of California, Los Angeles)

  • Kevin M. Simmons

    (Oklahoma City University)

  • Daniel Sutter

    (University of Oklahoma)

Abstract

We examine applications to the Oklahoma Saferoom Initiative, which offered rebates to residents for construction of an in-home tornado shelter. Markets for risk mitigation are prone to market failure because consumers treat low probability, high consequence events as zero probability events. Tornado and tornado casualty rates vary across Oklahoma counties, and according to expected utility theory the application rate should vary accordingly. We confirm this prediction. Recent tornadoes and casualties, not surprisingly, predict application rates better than fifty year totals.

Suggested Citation

  • David Merrell & Kevin M. Simmons & Daniel Sutter, 2002. "The Market for Tornado Safety: Analysis of Applications to the Oklahoma Saferoom Initiative," Journal of Economic Insight, Missouri Valley Economic Association, vol. 28(1), pages 35-50.
    • Handle: RePEc:mve:journl:v:28:y:2002:i:1:p:35-50
    as

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    More about this item

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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