Grantee Research Project Results

Strategy and Cognition: Regulating Catastrophic Risk

EPA Grant Number: U915720
Title: Strategy and Cognition: Regulating Catastrophic Risk
Investigators: Gersen, Jacob E.
Institution: University of Chicago
EPA Project Officer: Packard, Benjamin H
Project Period: June 1, 2000 through June 1, 2003
Project Amount: $102,000
RFA: STAR Graduate Fellowships (2000) RFA Text |  Recipients Lists
Research Category: Fellowship - Environmental , Academic Fellowships , Safer Chemicals

Objective:

The objective of this research project is to develop an accurate account of individual decision-making about high consequence/ low probability environmental risks that incorporates empirical findings about risk perception and judgment from cognitive psychology, with rational models of choice about risk and uncertainty from economics. This research also is intended to analyze the implications of individual judgments about catastrophic risk for the structure of government policy.

Approach:

This project mixes quantitative, formal, and historical methodology. After a discussion of the dominant theoretical approaches to risk and uncertainty, the project tests for the presence of cognitive biases using two sets of data. The first contains information on historical disaster risk and risk management activity in each state (1972?1997). Using an indicator of historical risk variability and a distributed lag model from economics, predictions from cognitive psychology are tested using data from actual markets. The second collection of data relies on counties and communities as the unit of analysis and will explore clustering effects in the selection of risk management strategies for dealing with disaster risk. In addition to quantitative methodology, the project relies on formal analysis to integrate the empirical findings into existing models of choice. Finally, given the insights from the formal model, implications for the structure of risk policy and institutions are developed.

Expected Results:

This study is intended to link empirical choice regularities with formal models—a prerequisite for the formation of effective environmental policy.

Supplemental Keywords:

risk, decision-making, catastrophic risk, natural disasters, flood, hurricane, earthquake, disaster relief, institutional choice, informational cascade, distributed lag, ambiguity, variance, availability, behavioral economics, cognitive psychology, ration., RFA, Scientific Discipline, Economic, Social, & Behavioral Science Research Program, Economics, decision-making, Ecological Risk Assessment, Ecology and Ecosystems, Social Science, Economics & Decision Making, Psychology, policy analysis, deliberative policy, policy making, risk characterization, economic research, decision analysis, risk management, decision making, cognitive limits, environmental policy, disaster risk, psychological attitudes, behavior change, behavior model, econometric analysis

Progress and Final Reports:

2000

2001

Final