Averting Catastrophes that Kill

Ian Martin and Robert Pindyck

No 23346, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We face a variety of potential catastrophes; nuclear or bioterrorism, a climate catastrophe, and a "mega-virus" are examples. Martin and Pindyck (AER 2015) showed that decisions to avert such catastrophes are interdependent, so that simple cost-benefit analysis breaks down. They assumed that catastrophic events cause "destruction," i.e., a reduction in the stream of consumption. But some catastrophes cause death instead of, or in addition to, destruction. Here we incorporate death in a model of catastrophe avoidance, and show how it affects the interdependence of catastrophic events and the "willingness to pay" to avoid those events.

JEL-codes: D81 H12 H56 Q50 Q54 (search for similar items in EconPapers)
Date: 2017-04
New Economics Papers: this item is included in nep-ene and nep-env
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