Risk Perception of Traffic Participants

Adriana Tanneke de Blaeij and Daniel van Vuuren ()

No 01-027/3, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: In this paper we study the risk perception of traffic participants. Firstly, we give an overview of previously used methodologies for the monetary valuation of transport safety. These methodologies do not distinguish between the individual's assessment of probabilities and her valuation of possible outcomes. A great disadvantage of these approaches is therefore that one has to make the assumption that people correctly perceive the probabilities. Prospect theory does not make this assumption. Our procedure, which is based on this methodology, consists of three steps. The first step is to determine the certainty equivalent for avoiding road accidents. The second step is the elicitation of the utility function. The final step is the elicitation of the probability weighting function. With this information we directly obtain the perceived value of the probability for accident Ai. The first, tentative, results show that the valuation of losses is well represented by a utility function that is concave in shape. Secondly, our preliminary results show that when people have to choose whether or not to participate in a potentially risky activity with a low probability of the "bad outcome" (say ? 1/100), they base their decision on the possible outcomes of the activity rather than on the probabilities involved. The empirical conclusion is therefore that people base their final decision mainly on the possible outcomes and not so much on probabilities whenever there are very small probabilities involved.

Date: 2001-03-05
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Persistent link: http://EconPapers.repec.org/RePEc:dgr:uvatin:20010027

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