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Determinants of Probability Neglect and Risk Attitudes for Disaster Risk: An Online Experimental Study of Flood Insurance Demand among Homeowners

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  • Peter John Robinson
  • W. J. Wouter Botzen

Abstract

Little is known about why individuals place either a high or a very low value on mitigating risks of disaster‐type events, like floods. This study uses panel data methods to explore the psychological factors affecting probability neglect of flood risk relevant to the zero end‐point of the probability weighting function in Prospect Theory, and willingness‐to‐pay for flood insurance. In particular, we focus on explanatory variables of anticipatory and anticipated emotions, as well as the threshold of concern. Moreover, results obtained under real and hypothetical incentives are compared in an experiment with high experimental outcomes. Based on our findings, we suggest several policy recommendations to overcome individual decision processes, which may hinder flood protection efforts.

Suggested Citation

  • Peter John Robinson & W. J. Wouter Botzen, 2019. "Determinants of Probability Neglect and Risk Attitudes for Disaster Risk: An Online Experimental Study of Flood Insurance Demand among Homeowners," Risk Analysis, John Wiley & Sons, vol. 39(11), pages 2514-2527, November.
    • Handle: RePEc:wly:riskan:v:39:y:2019:i:11:p:2514-2527
    DOI: 10.1111/risa.13361
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    Cited by:

    1. Osberghaus, Daniel & Botzen, Wouter & Kesternich, Martin & Iurkova, Ekaterina, 2022. "The Intention-Behavior Gap in Climate Change Adaptation," VfS Annual Conference 2022 (Basel): Big Data in Economics 264073, Verein für Socialpolitik / German Economic Association.
    2. W. J. Wouter Botzen & Jantsje M. Mol & Peter J. Robinson & Juan Zhang & Jeffrey Czajkowski, 2022. "Individual hurricane evacuation intentions during the COVID-19 pandemic: insights for risk communication and emergency management policies," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 111(1), pages 507-522, March.
    3. Matt Baucum & Richard S. John & William Burns & Kent E. Portney & Jeryl L. Mumpower, 2021. "Modeling affective and cognitive responses to soft-target terrorism over time," Environment Systems and Decisions, Springer, vol. 41(2), pages 227-235, June.
    4. Sahar Zavareh Hofmann, 2022. "Build Back Better and Long-Term Housing Recovery: Assessing Community Housing Resilience and the Role of Insurance Post Disaster," Sustainability, MDPI, vol. 14(9), pages 1-23, May.

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