Valuing protection: Empirical and experimental studies in mitigation and insurance



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Texas Tech University


My dissertation will evaluate this issue from four perspectives. Chapter II is a review of literature pertaining to risk generally, and mitigation specifically. The purpose of the review of literature is to lay the foundation for the remaining chapters. Chapter III presents a theoretical model. The purpose of Chapter III is to modify an existing static model based on a standard expected utility formulation and add elements which may allow a rational agent to voluntarily choose mitigation. Chapter V uses data fi"om a gulf coast city, to test the value of mitigation empirically. I am fortunate to have a unique database, which allows me to isolate a well-known mitigation feature and use a standard econometric technique to test the significance of this feature. In addition, a structural integrity index based on engineering relationships is used to test whether the market places a higher value on more storm-worthy structures. Chapter VI uses data collected from an economics experiment to evaluate insurance and mitigation in a laboratory market. The benefit of lab experiments is that data can be collected from individuals who participate in a controlled market setting. This enables the researcher to evaluate inferences from individual decisions as well as the behavior of the market. My concluding chapter will link the theoretical, empirical, and experimental chapters. I show the contribution of each study to a more cohesive understanding of the value of mitigation. This work provides insight for policy-makers who want to increase individual mitigation efforts.



Stormproof, Building, Homeownwer's insurance, Hurricanes, Property, Insurance