Market Failure in Information: The National Flood Insurance Program
The National Flood Insurance Program (NFIP) was established in 1968 and requires mandatory flood insurance for property owners who have federally backed mortgages. Krutilla (1966) noted that a compulsory national flood insurance program could greatly improve the economic efficiency of flood plain occupancy in the United States. However, in order to realize the efficiency gains suggested by Krutilla, property owners must have sufficient information about flood risk and insurance premiums to make well-informed home purchase decisions. Using survey data from Boulder, Colorado, we find significant evidence of market failure in information in the NFIP program. The majority of survey respondents, all of whom live in a special flood hazard area, report they did not fully understand the degree of flood risk or the cost of insuring against this risk when negotiating the purchase of their property.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Colin F. Camerer & Howard Kunreuther, 1989. "Decision processes for low probability events: Policy implications," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 8(4), pages 565-592.
When requesting a correction, please mention this item's handle: RePEc:uwp:landec:v:78:y:2002:i:4:p:515-521. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.