Risk Preferences Regarding Multiple Fatalities and Some Implications for Societal Risk Decision Making—An Empirical Study

Abstract

Risk preferences related to accidents or other situations involving the possibility of multiple fatalities were studied in 87 persons in Sweden belonging to two separate groups with professional or educational knowledge of risk-and crisismanagement issues. Use was made of a tradeoff method, the results obtained consisting of von Neuman-Morgenstern utility functions over the range of 0-1000 fatalities. Most of the utility curves for the number of fatalities were found to be convex, implying the majority of subjects to display risk-seeking behaviour. Implications of the findings for societal risk decision making are discussed, along with prospective areas of application and the possibilities of considering other dimensions than the number of fatalities.

Significance of "high probability/low damage" versus "low probability/high damage" flood events

“…The exponential and multiplicative models are related (α(D)=D β−1 ), and can be used interchangeably. Although there has been an intense discussion on risk aversion, empirical studies on people's risk preferences regarding multiple fatalities are rare (Abrahamsson and Johansson, 2006).…”

“…Data on the preference of the respective decision makers are necessary but frequently not readily available (Mechler, 2004), and risk aversion functions are not the same for different hazards (Bohnenblust and Slovic, 1998). Recently, Abrahamsson and Johansson (2006) studied risk preferences of experts in the risk management sector, related to accidents or other situations with the possibility of multiple fatalities. Surprisingly, the majority of the subjects showed risk-seeking behaviour.…”

“…Slovic et al, 1984;Hubert et al, 1991;Mechler, 2004;Abrahamsson and Johansson, 2006). For example, the exponential model is based on a utility model stating that the societal cost (or disutility) of N lives lost in a single accident is a function of N β (Slovic et al, 1984).…”

Experimental Evidence Against the Paradigm of Mortality Risk Aversion

“…Recent research from Sweden suggests that even hazard experts do not overweight the number of potential fatalities in their decisions about risky situations. ( 8 ) Though this risk preference might be partly explained by their accountability and feelings of personal responsibility toward society in case of any fatal accident, ( 32 ) the Swedish experts did not follow the mortality risk aversion paradigm, but tended to be rather risk seeking in their hypothetical live saving interventions. This result motivated Study 2, wherein we replicated and extended the Swedish study.…”

“…The analysis of the experimental data used the property of the trade‐off method that differences in disutility between the subsequent tasks i − 1 and i are equal. Analogous to Abrahamsson and Johansson, ( 8 ) we assigned a utility value of 1 to the best and a utility value of 0 to the worst outcome. We then fitted a parametric weighting function, which was adapted from Tversky and Kahneman's ( 25 ) power function v ( x ) =− (− x ) α for x < 0, to map the number of fatal outcomes N into each subject's disutility space: …”