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Understanding Cumulative Risk Perception from Judgments and Choices: An Application to Flood Risks
Author(s) -
De La Maza Cristóbal,
Davis Alex,
Gonzalez Cleotilde,
Azevedo Inês
Publication year - 2019
Publication title -
risk analysis
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.972
H-Index - 130
eISSN - 1539-6924
pISSN - 0272-4332
DOI - 10.1111/risa.13206
Subject(s) - cumulative risk , cumulative prospect theory , cumulative effects , cumulative distribution function , risk perception , flood myth , risk assessment , perception , event (particle physics) , cumulative incidence , actuarial science , psychology , statistics , geography , computer science , mathematics , economics , expected utility hypothesis , medicine , computer security , probability density function , ecology , archaeology , biology , cohort , quantum mechanics , physics , neuroscience
Catastrophic events, such as floods, earthquakes, hurricanes, and tsunamis, are rare, yet the cumulative risk of each event occurring at least once over an extended time period can be substantial. In this work, we assess the perception of cumulative flood risks, how those perceptions affect the choice of insurance, and whether perceptions and choices are influenced by cumulative risk information. We find that participants' cumulative risk judgments are well represented by a bimodal distribution, with a group that severely underestimates the risk and a group that moderately overestimates it. Individuals who underestimate cumulative risks make more risk‐seeking choices compared to those who overestimate cumulative risks. Providing explicit cumulative risk information for relevant time periods, as opposed to annual probabilities, is an inexpensive and effective way to improve both the perception of cumulative risk and the choices people make to protect against that risk.