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Averting And Insurance Decisions In The Wildland–Urban Interface: Implications Of Survey And Experimental Data For Wildfire Risk Reduction Policy

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Listed:
  • JOHN TALBERTH
  • ROBERT P. BERRENS
  • MICHAEL MCKEE
  • MICHAEL JONES

Abstract

When confronted by catastrophic wildfire risk, homeowners simultaneously allocate resources between insurance and averting activities. Expected utility theory suggests that complete insurance coverage precludes investment in averting activities. However, when potential losses include a significant nonmarket component, optimal choice includes both. To investigate this issue, the authors analyze a unique combination of contingent valuation and experimental data. Both settings include a split‐sample treatment to test the influence of wildfire risk zone information. The authors find that amenity values, subjective risk, averting efficacy perception, and demographic factors influence both willingness to pay and averting share and that risk information has the predicted ordering effect. (JEL C9, Q51, Q54)

Suggested Citation

  • John Talberth & Robert P. Berrens & Michael Mckee & Michael Jones, 2006. "Averting And Insurance Decisions In The Wildland–Urban Interface: Implications Of Survey And Experimental Data For Wildfire Risk Reduction Policy," Contemporary Economic Policy, Western Economic Association International, vol. 24(2), pages 203-223, April.
    • Handle: RePEc:bla:coecpo:v:24:y:2006:i:2:p:203-223
    DOI: 10.1093/cep/byj021
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    More about this item

    JEL classification:

    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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