The Market for Tornado Safety: Analysis of Applications to the Oklahoma Saferoom Initiative

David Merrell, Kevin M. Simmons and Daniel Sutter
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David Merrell: University of California, Los Angeles
Kevin M. Simmons: Oklahoma City University
Daniel Sutter: University of Oklahoma

Journal of Economic Insight, 2002, vol. 28, issue 1, 35-50

Abstract: We examine applications to the Oklahoma Saferoom Initiative, which offered rebates to residents for construction of an in-home tornado shelter. Markets for risk mitigation are prone to market failure because consumers treat low probability, high consequence events as zero probability events. Tornado and tornado casualty rates vary across Oklahoma counties, and according to expected utility theory the application rate should vary accordingly. We confirm this prediction. Recent tornadoes and casualties, not surprisingly, predict application rates better than fifty year totals.

JEL-codes: D81 I18 (search for similar items in EconPapers)
Date: 2002
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Persistent link: https://EconPapers.repec.org/RePEc:mve:journl:v:28:y:2002:i:1:p:35-50

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