Risk, Loss, and Ambiguity Aversion after a Natural Disaster

Robert Shupp, Scott Loveridge (), Mark Skidmore, Jungmin Lim () and Cynthia Rogers
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Scott Loveridge: Michigan State University
Jungmin Lim: Michigan State University

Economics of Disasters and Climate Change, 2017, vol. 1, issue 2, No 1, 142 pages

Abstract: Abstract We use survey and experimental methods to examine how residents’ risk, loss, and ambiguity aversion are affected by a tornado event. We survey residents of the Oklahoma City area where a 2013 tornado resulted in massive damage and 24 fatalities. Our evaluation shows that risk aversion increased for those who were injured by the tornado. However, persons who lost a friend or neighbor were emboldened, experiencing reduced risk aversion. Ambiguity aversion increased for those who lost their residence or had property damage, and loss aversion increased for those who lost a friend or neighbor. Risk preferences of individual citizens in disasters are affected in important and intricate ways, and these alterations may influence choices such as how and when to rebuild private homes, businesses and invest in a region’s critical public infrastructure.

Keywords: Natural disaster; Risk; loss; ambiguity; Tornado; Experiment; Survey (search for similar items in EconPapers)
JEL-codes: D11 D81 H12 R5 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (12)

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DOI: 10.1007/s41885-017-0013-2

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