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Utility Functions for Equity and Public Risk

Author

Listed:
  • Ralph L. Keeney

    (Woodward-Clyde Consultants, San Francisco)

Abstract

With many large-scale projects, such as power plants, some members of the public will necessarily incur a risk. Public fatalities may result from either normal operations (e.g., via pollution) or accidents. Often in such cases, a small group of the public incur the risks, whereas a different group of the public receives the benefits from the project. In these circumstances, a major issue concerns the equity or fairness afforded members of the public. This paper develops the concept of an equitable distribution of risk to address this issue. Utility functions are found which are consistent with various basic value attitudes involving risk equity.

Suggested Citation

  • Ralph L. Keeney, 1980. "Utility Functions for Equity and Public Risk," Management Science, INFORMS, vol. 26(4), pages 345-353, April.
  • Handle: RePEc:inm:ormnsc:v:26:y:1980:i:4:p:345-353
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    File URL: http://dx.doi.org/10.1287/mnsc.26.4.345
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    Cited by:

    1. Bernard, Carole & Rheinberger, Christoph & Treich, Nicolas, 2017. "Catastrophe Aversion and Risk Equity in an Interdependent World," TSE Working Papers 17-811, Toulouse School of Economics (TSE).
    2. Adler, Matthew & Hammitt, James & Treich, Nicolas, 2012. "The Social Value of Mortality Risk Reduction: VSL vs. the Social Welfare Function Approach," LERNA Working Papers 12.08.365, LERNA, University of Toulouse.
    3. Ingrid T. Rohde & Kirsten M. Rohde, 2015. "Managing social risks – tradeoffs between risks and inequalities," Journal of Risk and Uncertainty, Springer, vol. 51(2), pages 103-124, October.
    4. Cesar Calvo & Stefan Dercon, 2013. "Vulnerability to individual and aggregate poverty," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 41(4), pages 721-740, October.
    5. Bommier, Antoine & Lanz, Bruno & Zuber, Stéphane, 2015. "Models-as-usual for unusual risks? On the value of catastrophic climate change," Journal of Environmental Economics and Management, Elsevier, vol. 74(C), pages 1-22.
    6. Cooper, W. W. & Hemphill, H. & Huang, Z. & Li, S. & Lelas, V. & Sullivan, D. W., 1997. "Survey of mathematical programming models in air pollution management," European Journal of Operational Research, Elsevier, vol. 96(1), pages 1-35, January.
    7. Marc Fleurbaey & Stéphane Zuber, 2013. "Inequality aversion and separability in social risk evaluation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 54(3), pages 675-692, November.
    8. Marc Fleurbaey, 2010. "Assessing Risky Social Situations," Journal of Political Economy, University of Chicago Press, vol. 118(4), pages 649-680, August.
    9. Ingrid Rohde & Kirsten Rohde, 2011. "Risk attitudes in a social context," Journal of Risk and Uncertainty, Springer, vol. 43(3), pages 205-225, December.
    10. Bleichrodt, Han, 1997. "Health utility indices and equity considerations," Journal of Health Economics, Elsevier, vol. 16(1), pages 65-91, February.
    11. Adler, Matthew D. & Hammitt, James K. & Treich, Nicolas, 2014. "The social value of mortality risk reduction: VSL versus the social welfare function approach," Journal of Health Economics, Elsevier, vol. 35(C), pages 82-93.
    12. repec:hal:journl:halshs-00344468 is not listed on IDEAS
    13. Antoine Bommier & Bruno Lanz & Stéphane Zuber, 2014. "Fair management of social risk," Documents de travail du Centre d'Economie de la Sorbonne 14017, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    14. Matthew Adler & Nicolas Treich, 2015. "Prioritarianism and Climate Change," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 62(2), pages 279-308, October.
    15. Zanakis, Stelios H. & Mandakovic, Tomislav & Gupta, Sushil K. & Sahay, Sundeep & Hong, Sungwan, 1995. "A review of program evaluation and fund allocation methods within the service and government sectors," Socio-Economic Planning Sciences, Elsevier, vol. 29(1), pages 59-79, March.
    16. Kjær, Trine & Nielsen, Jytte Seested, 2016. "An investigation into procedure (in)variance in the valuation of mortality risk reductions," COHERE Working Paper 2016:4, University of Southern Denmark, COHERE - Centre of Health Economics Research.
    17. Christoph M. Rheinberger & Nicolas Treich, 2017. "Attitudes Toward Catastrophe," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 67(3), pages 609-636, July.
    18. Rausser, Gordon C. & Zilberman, David D., 1981. "Public research in agriculture: an alternative institutional framework," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt1b73b3jj, Department of Agricultural & Resource Economics, UC Berkeley.
    19. Thibault Gajdos & John A. Weymark & Claudio Zoli, 2008. "Shared Destinies and the Measurement and of Social Risk Equity," Vanderbilt University Department of Economics Working Papers 0821, Vanderbilt University Department of Economics.
    20. James E. Smith & Detlof von Winterfeldt, 2004. "Anniversary Article: Decision Analysis in Management Science," Management Science, INFORMS, vol. 50(5), pages 561-574, May.

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    Keywords

    utility theory: preference;

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