Quantitative Analysis on a Dynamic Inconsistency Problem with Constructing a Disaster Prevention Facility: A case study of a seawall in the city of Rikuzentakata (Japanese)

Tatsuhito Kono, Naoki Kitamura, Kiyoshi Yamasaki and Kazuki Iwakami

Discussion Papers (Japanese) from Research Institute of Economy, Trade and Industry (RIETI)

Abstract: Cost-benefit analysis (CBA) is used to optimize investment in public projects. In many countries, CBA is mandatory for the provision of most public services. However, once CBA is mandated, residents can strategically alter their behaviors based on a dynamic inconsistency in which the CBA-based optimal service level depends on residents' behaviors. This paper explores this dynamic inconsistency problem quantitatively. Taking the construction of a seawall in the city of Rikuzentakata as an example, we show the mechanism of the occurrence of a dynamic inconsistency problem and quantify the level of inefficiency compared to that of the first-best case.

Pages: 43 pages
Date: 2013-06
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Persistent link: https://EconPapers.repec.org/RePEc:eti:rdpsjp:13045

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