Perceived Risks and Willingness to Pay for Hurricane Protection

This small grant exploratory research proposal has two main objectives:

1) Explore current and future perceptions of risks of hurricanes.

2) Obtain current and future willingness to pay to reduce such risks.

Currently transplanted New Orleans residents will be in the sample used for the analysis, with possible inclusion of other Gulf Coast residents who may be relocating because of Hurricane Rita. These residents will then be tracked for approximately one year and asked their updated perceptions and willingness to pay to reduce hurricane risks. The results will test the commonly held hypotheses that perceived risks are high immediately following an event such as Hurricane Katrina, but will fall over time, and that willingness to pay will depend on the magnitude of these risks. State-of the art economic thinking on the way to incorporate subjective risks into behavioral modeling will be combined with a formal model of willingness to pay under risk or uncertainty. WTP will be obtained using choice experiments, where respondents will be presented with choices, each containing several attributes of housing location decisions. Included in these will be possible chances of future hurricane damage, and a key economic variable relating to the price of a home or the cost of living in that location. The research team will design a survey to give in person, to transplanted New Orleans residents currently living in College Station , Texas , and possibly some from the Galveston area who may evacuate because of Hurricane Rita.

Principal Investigator: Douglas Shaw

Co- Principal Investigators: Samuel Brody, William Neilson, Mary Riddel, Richard Woodward

Funding Organization: National Science Foundation, Award No. SES-0554830