In this paper, we investigate the dynamics of informational regulatory approaches by analyzing the impact of smog alerts issued on consecutive days on discretionary outdoor activities in Southern California. Short-run adjustments to transitory risk entail costs that are likely to influence the set of evasive actions pursued by those at risk. Our results confirm that the cost of intertemporally substituting activities is increasing over time: when alerts are issued on two successive days, any response on the first day has largely disappeared by the second day. Small reprieves from alerts, however, reset these costs. Our findings imply that a time-varying decision rule that accounts for multiple day air quality forecasts may improve social welfare.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
14271.
Length: Date of creation: Aug 2008 Date of revision: Handle: RePEc:nbr:nberwo:14271
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Find related papers by JEL classification: D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
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