IDEAS home Printed from https://ideas.repec.org/a/inm/ordeca/v15y2018i2p55-71.html

Modeling and Validating Public–Private Partnerships in Disaster Management

Author

Listed:
  • Peiqiu Guan

    (Department of Industrial and Systems Engineering, University at Buffalo, The State University of New York, Buffalo, New York 14260)

  • Jing Zhang

    (Department of Industrial and Systems Engineering, University at Buffalo, The State University of New York, Buffalo, New York 14260)

  • Vineet M. Payyappalli

    (Department of Industrial and Systems Engineering, University at Buffalo, The State University of New York, Buffalo, New York 14260)

  • Jun Zhuang

    (Department of Industrial and Systems Engineering, University at Buffalo, The State University of New York, Buffalo, New York 14260)

Abstract

This paper applies game theory and expected utility theory models to study the optimal public–private partnerships (PPPs) in disaster preparedness considering the uncertain consequences of the disasters, the investment costs, and the private sector’s potential risk attitudes, including risk-seeking behavior, risk aversion, and risk neutrality. We study the private sector’s best response and the subgame perfect Nash equilibrium solutions. Our results show that the public sector provides the least amount of subsidy to the risk-averse private sector and the highest amount of subsidy to the risk-seeking private sector. On the contrary, the risk-averse private sector invests the most, and the risk-seeking private sector invests the least. Finally, we validate the model results using a two-stage experiment with 91 participants. This paper provides insights into how to construct win–win PPPs in disaster preparedness with considerations of the private sector’s risk behavior.

Suggested Citation

  • Peiqiu Guan & Jing Zhang & Vineet M. Payyappalli & Jun Zhuang, 2018. "Modeling and Validating Public–Private Partnerships in Disaster Management," Decision Analysis, INFORMS, vol. 15(2), pages 55-71, June.
    • Handle: RePEc:inm:ordeca:v:15:y:2018:i:2:p:55-71
    DOI: 10.1287/deca.2017.0361
    as

    Download full text from publisher

    File URL: https://doi.org/10.1287/deca.2017.0361
    Download Restriction: no
    File URL: https://libkey.io/10.1287/deca.2017.0361?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. repec:inm:ordeca:v:14:y:2015:i:4:p:173-189 is not listed on IDEAS
    2. Peiqiu Guan & Jun Zhuang, 2015. "Modeling Public–Private Partnerships in Disaster Management via Centralized and Decentralized Models," Decision Analysis, INFORMS, vol. 12(4), pages 173-189, December.
    3. J. S. Dodgson, 1986. "Benefits of Changes in Urban Public Transport Subsidies in the Major Australian Cities," The Economic Record, The Economic Society of Australia, vol. 62(2), pages 224-235, June.
    4. Mohsen Golalikhani & Jun Zhuang, 2011. "Modeling Arbitrary Layers of Continuous‐Level Defenses in Facing with Strategic Attackers," Risk Analysis, John Wiley & Sons, vol. 31(4), pages 533-547, April.
    5. Machina, Mark J, 1987. "Choice under Uncertainty: Problems Solved and Unsolved," Journal of Economic Perspectives, American Economic Association, vol. 1(1), pages 121-154, Summer.
    6. Jun Zhuang & Vicki M. Bier, 2007. "Balancing Terrorism and Natural Disasters---Defensive Strategy with Endogenous Attacker Effort," Operations Research, INFORMS, vol. 55(5), pages 976-991, October.
    7. Paul Raschky & Hannelore Weck-Hannemann, 2007. "Charity hazard - A real hazard to natural disaster insurance," Working Papers 2007-04, Faculty of Economics and Statistics, Universität Innsbruck.
    8. repec:bla:ecorec:v:62:y:1986:i:177:p:224-35 is not listed on IDEAS
    9. Terrence August & Tunay I. Tunca, 2006. "Network Software Security and User Incentives," Management Science, INFORMS, vol. 52(11), pages 1703-1720, November.
    10. Kenneth J. Arrow & Robert C. Lind, 1974. "Uncertainty and the Evaluation of Public Investment Decisions," Palgrave Macmillan Books, in: Chennat Gopalakrishnan (ed.), Classic Papers in Natural Resource Economics, chapter 3, pages 54-75, Palgrave Macmillan.
    11. Brookshire, David S & Thayer. Mark A & Tschirhart, John & Schulze, William D, 1985. "A Test of the Expected Utility Model: Evidence from Earthquake Risks," Journal of Political Economy, University of Chicago Press, vol. 93(2), pages 369-389, April.
    12. Vicki M. Bier & Naraphorn Haphuriwat & Jaime Menoyo & Rae Zimmerman & Alison M. Culpen, 2008. "Optimal Resource Allocation for Defense of Targets Based on Differing Measures of Attractiveness," Risk Analysis, John Wiley & Sons, vol. 28(3), pages 763-770, June.
    13. Tversky, Amos & Kahneman, Daniel, 1992. "Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
    14. Paul Schultz, T., 2004. "School subsidies for the poor: evaluating the Mexican Progresa poverty program," Journal of Development Economics, Elsevier, vol. 74(1), pages 199-250, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hunt, Kyle & Agarwal, Puneet & Zhuang, Jun, 2022. "On the adoption of new technology to enhance counterterrorism measures: An attacker–defender game with risk preferences," Reliability Engineering and System Safety, Elsevier, vol. 218(PB).
    2. Feng, Zhuo & Song, Jinbo & Yang, Xiaoxing & Guo, Ran, 2023. "Contractual flexibility, firm effort, and subsidy design: A comparison of PPP project contracts," European Journal of Operational Research, Elsevier, vol. 307(1), pages 484-496.
    3. Vicki M. Bier & Simon French, 2020. "From the Editors: Decision Analysis Focus and Trends," Decision Analysis, INFORMS, vol. 17(1), pages 1-8, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Peiqiu Guan & Jun Zhuang, 2015. "Modeling Public–Private Partnerships in Disaster Management via Centralized and Decentralized Models," Decision Analysis, INFORMS, vol. 12(4), pages 173-189, December.
    2. Mohammad E. Nikoofal & Mehmet Gümüs, 2015. "On the value of terrorist’s private information in a government’s defensive resource allocation problem," IISE Transactions, Taylor & Francis Journals, vol. 47(6), pages 533-555, June.
    3. Hausken, Kjell & Welburn, Jonathan W. & Zhuang, Jun, 2025. "A Review of Game Theory and Risk and Reliability Analysis in Infrastructures and Networks," Reliability Engineering and System Safety, Elsevier, vol. 261(C).
    4. Hunt, Kyle & Zhuang, Jun, 2024. "A review of attacker-defender games: Current state and paths forward," European Journal of Operational Research, Elsevier, vol. 313(2), pages 401-417.
    5. Peiqiu Guan & Jun Zhuang, 2016. "Modeling Resources Allocation in Attacker‐Defender Games with “Warm Up” CSF," Risk Analysis, John Wiley & Sons, vol. 36(4), pages 776-791, April.
    6. Hunt, Kyle & Agarwal, Puneet & Zhuang, Jun, 2022. "On the adoption of new technology to enhance counterterrorism measures: An attacker–defender game with risk preferences," Reliability Engineering and System Safety, Elsevier, vol. 218(PB).
    7. Ridwan Al Aziz & Meilin He & Jun Zhuang, 2020. "An Attacker–defender Resource Allocation Game with Substitution and Complementary Effects," Risk Analysis, John Wiley & Sons, vol. 40(7), pages 1481-1506, July.
    8. Mohammad Ebrahim Nikoofal & Morteza Pourakbar & Mehmet Gumus, 2023. "Securing containerized supply chain through public and private partnership," Production and Operations Management, Production and Operations Management Society, vol. 32(7), pages 2341-2361, July.
    9. Schlicher, Loe & Lurkin, Virginie, 2024. "Fighting pickpocketing using a choice-based resource allocation model," European Journal of Operational Research, Elsevier, vol. 315(2), pages 580-595.
    10. Phillips Peter J. & Pohl Gabriela, 2018. "The Deferral of Attacks: SP/A Theory as a Model of Terrorist Choice when Losses Are Inevitable," Open Economics, De Gruyter, vol. 1(1), pages 71-85, February.
    11. Schrieks, Teun & Botzen, W.J. Wouter & Haer, Toon & Aerts, Jeroen C.J.H., 2024. "Drought risk attitudes in pastoral and agro-pastoral communities in Kenya," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 108(C).
    12. Mohsen Golalikhani & Jun Zhuang, 2011. "Modeling Arbitrary Layers of Continuous‐Level Defenses in Facing with Strategic Attackers," Risk Analysis, John Wiley & Sons, vol. 31(4), pages 533-547, April.
    13. Xiaojun (Gene) Shan & Jun Zhuang, 2014. "Modeling Credible Retaliation Threats in Deterring the Smuggling of Nuclear Weapons Using Partial Inspection---A Three-Stage Game," Decision Analysis, INFORMS, vol. 11(1), pages 43-62, March.
    14. Basieva, Irina & Khrennikova, Polina & Pothos, Emmanuel M. & Asano, Masanari & Khrennikov, Andrei, 2018. "Quantum-like model of subjective expected utility," Journal of Mathematical Economics, Elsevier, vol. 78(C), pages 150-162.
    15. Scott Farrow, 2007. "The Economics Of Homeland Security Expenditures: Foundational Expected Cost‐Effectiveness Approaches," Contemporary Economic Policy, Western Economic Association International, vol. 25(1), pages 14-26, January.
    16. Brian J. Lunday & Hanif D. Sherali & Theodore S. Glickman, 2010. "The Nested Event Tree Model with Application to Combating Terrorism," INFORMS Journal on Computing, INFORMS, vol. 22(4), pages 620-634, November.
    17. Jinho Cha & Justin Yu & Junyeol Ryu & Eunchan Daniel Cha & Hyeyoung Hwang, 2025. "Inverse Behavioral Optimization of QALY-Based Incentive Systems Quantifying the System Impact of Adaptive Health Programs," Papers 2510.22518, arXiv.org.
    18. Border, Kim C. & Segal, Uzi, 1997. "Coherent Odds and Subjective Probability," University of Western Ontario, Departmental Research Report Series 9717, University of Western Ontario, Department of Economics.
    19. de Koning, Koen & Filatova, Tatiana & Bin, Okmyung, 2017. "Bridging the Gap Between Revealed and Stated Preferences in Flood-prone Housing Markets," Ecological Economics, Elsevier, vol. 136(C), pages 1-13.
    20. Andrea Morone & Ozlem Ozdemir, 2006. "Valuing Protection against Low Probability, High Loss Risks: Experimental Evidence," Papers on Strategic Interaction 2006-34, Max Planck Institute of Economics, Strategic Interaction Group.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ordeca:v:15:y:2018:i:2:p:55-71. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.