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The Role of Risk Aversion and Lay Risk in the Probabilistic Externality Assessment for Oil Tanker Routes to Europe

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  • Andrea Bigano
  • Mariaester Cassinelli
  • Anil Markandya
  • Fabio Sferra

Abstract

Oil spills are a major cause of environmental concern, in particular for Europe. We extend the traditional approach of assessing the welfare losses for individuals potentially affected by an oil spill, by taking into full account the implications of the probabilistic nature of the related externalities. Our approach differs from the traditional one in three respects: it allows for risk aversion; it adopts an ex-ante rather than an ex-post perspective; it allows for subjective oil-spill probabilities (held by the lay public) more than for expert-assessed probabilities. We illustrate this methodology with a case study on the Aegean Sea. © 2010 LSE and the University of Bath

Suggested Citation

  • Andrea Bigano & Mariaester Cassinelli & Anil Markandya & Fabio Sferra, 2010. "The Role of Risk Aversion and Lay Risk in the Probabilistic Externality Assessment for Oil Tanker Routes to Europe," Journal of Transport Economics and Policy, University of Bath, vol. 44(1), pages 93-118, January.
    • Handle: RePEc:tpe:jtecpo:v:44:y:2010:i:1:p:93-118
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    References listed on IDEAS

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    5. Friend, Irwin & Blume, Marshall E, 1975. "The Demand for Risky Assets," American Economic Review, American Economic Association, vol. 65(5), pages 900-922, December.
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    More about this item

    JEL classification:

    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • L91 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Transportation: General

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