Comparing multistate expected damages, option price and cumulative prospect measures for valuing flood protection
| dc.contributor.author | Farrow, Scott | |
| dc.contributor.author | Scott, Michael | |
| dc.date.accessioned | 2021-08-10T15:41:06Z | |
| dc.date.available | 2021-08-10T15:41:06Z | |
| dc.date.issued | 2013-04-02 | |
| dc.description.abstract | Floods are risky events ranging from small to catastrophic. Although expected flood damages are frequently used for economic policy analysis, alternative measures such as option price (OP) and cumulative prospect value exist. The empirical magnitude of these measures whose theoretical preference is ambiguous is investigated using case study data from Baltimore City. The outcome for the base case OP measure increases mean willingness to pay over the expected damage value by about 3%, a value which is increased with greater risk aversion, reduced by increased wealth, and only slightly altered by higher limits of integration. The base measure based on cumulative prospect theory is about 46% less than expected damages with estimates declining when alternative parameters are used. The method of aggregation is shown to be important in the cumulative prospect case which can lead to an estimate up to 41% larger than expected damages. Expected damages remain a plausible and the most easily computed measure for analysts. | en_US |
| dc.description.sponsorship | Appreciation is extended to Joseph Kadane, Andrew Solow and three anonymous referees for comments; Thomas Wallace, Michele Stegman, and Chava Carter for research assistance; and to seminar and conference participants at the Woods Hole Oceanographic Institution, the Society for Benefit-Cost Analysis Annual Meeting, and Carnegie Mellon University. Appreciation is also extended to the John D. and Catherine T. MacArthur Foundation and the Woods Hole Oceanographic Institution for funding. | en_US |
| dc.description.uri | https://agupubs.onlinelibrary.wiley.com/doi/full/10.1002/wrcr.20217 | en_US |
| dc.format.extent | 11 pages | en_US |
| dc.genre | conference papers and proceedings | en_US |
| dc.identifier | doi:10.13016/m2j3rb-telv | |
| dc.identifier.citation | Farrow, Scott; Scott, Michael; Comparing multistate expected damages, option price and cumulative prospect measures for valuing flood protection; Water Resources Research, 49, 5, pages 2638-2648, 2 April, 2013; https://doi.org/10.1002/wrcr.20217 | en_US |
| dc.identifier.uri | https://doi.org/10.1002/wrcr.20217 | |
| dc.identifier.uri | http://hdl.handle.net/11603/22367 | |
| dc.language.iso | en_US | en_US |
| dc.publisher | American Geophysical Union | en_US |
| dc.relation.isAvailableAt | The University of Maryland, Baltimore County (UMBC) | |
| dc.relation.ispartof | UMBC Economics Department Collection | |
| dc.relation.ispartof | UMBC Faculty Collection | |
| dc.rights | This item is likely protected under Title 17 of the U.S. Copyright Law. Unless on a Creative Commons license, for uses protected by Copyright Law, contact the copyright holder or the author. | en_US |
| dc.rights | © 2021 American Geophysical Union. All Rights Reserved | |
| dc.title | Comparing multistate expected damages, option price and cumulative prospect measures for valuing flood protection | en_US |
| dc.type | Text | en_US |
| dcterms.creator | https://orcid.org/0000-0001-7106-8924 | en_US |