Ex Ante and Ex Post Values for Changes in Risks

Abstract

In this paper, I take risk to mean a composite of the probability of an adverse event and the severity of the consequences of the event. I explore two issues in the economic valuation of changes in individual risks brought about by public policies. These are: (1) the relationship between the values of risk prevention (i.e., the lowering of the probabilities of adverse events) and risk reduction (i.e., the reduction of the severity of the consequences of adverse events); and (2) the relationship between a ante and ex post measures of the value of changes in risk.

Estimating Fuel Cycle Externalities: Analytical Methods and Issues, Report 2

“…These simulations are quite similar to those of Freeman (1989) noted above. In the cases where the marginal value of reducing A increases with income (which holds for both utility functions given in yield the reverse conclusion.…”

“…Three papers provide models on this subject: Freeman (1989), Smith (1992), and Kunreuther and Easterling (1992). Each uses basically the same formulation, but Freeman's is the most straightforward.…”

“…These simulations use several different portrayals of individual preferences (i.e., two different state-dependent utility functions). In this effort, we have built on and extended work by Freeman (1989) and Smith (1992). To make the simulations as "realistic" as possible, we have drawn on the scant literature available for parameter values and, in particular, have used baseline data and results from a conventional damage assessment of nuclear power plant accidents performed as part of the U.S.-EC Fuel Cycle Study.…”

Transferring the benefits of avoided health effects from water pollution between Portugal and Costa Rica

“…Table 3 presents detailed episode descriptions. Although ex ante WTP is more realistic in a world of uncertainty, existing evidence suggests that the upward bias incurred is probably small for minor illnesses (less than 1 per cent in Freeman, 1989). (Loomis, 1992) and Score tests have been applied for this purpose (Bergland, Magnussen, and Navrud, 1999 Pains were taken to simplify the scenario to make conditions as favourable as possible for benefit transfer.…”

Comparing multistate expected damages, option price and cumulative prospect measures for valuing flood protection

“…The solutions were checked by determining that equation holds. As suggested by Wakker [], the exponential form of the utility function in Table is preferred to the economically equivalent form presented in Freeman [].…”