A risk benefit calculation method based on consumer behavior and household risk production function

Tadahiro Okuyama ()
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Tadahiro Okuyama: University of Nagasaki

Economics Bulletin, 2017, vol. 37, issue 2, 645-652

Abstract: Stated preference methods (SPMs) require researchers to use questionnaires to elicit from respondents their monetary values for benefits from a hypothetical risk reduction by the implementation of a particular project. The complexity of questionnaires makes it more difficult for respondents to choose the benefit values and complicates executing the risk reduction benefit surveys in the short term for policy-makers. The purpose of this study is to propose a risk reduction benefit evaluation model that incorporates individual behavior and subjective risks. The household production function approach is employed to express the individual's expected utility function. The results indicate that the SPM benefit values might be underestimated by the marginal change in the subjective risk. The method presented in this study is flexible and can be applied to measuring various patterns of risk reduction benefits using the economic market behavior data.

Keywords: risk reduction benefit; consumer behavior; household production function; subjective risk (search for similar items in EconPapers)
JEL-codes: D6 Q5 (search for similar items in EconPapers)
Date: 2017-04-09
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