Integrating Household Risk Mitigation Behavior in Flood Risk Analysis: An Agent‐Based Model Approach. Issue 10 (28th November 2016)

• Record Type: Journal Article
• Authors: Haer, Toon; Botzen, W. J. Wouter; de Moel, Hans; Aerts, Jeroen C. J. H.
• Is Part Of: Risk analysis. Volume 37:Issue 10(2017)
• Page Start: 1977
• Page End: 1992
• Publication Date: 2016-11-28
• Subjects: Bayesian updating -- expected utility theory -- flood insurance -- flood risk -- household adaptation -- prospect theory; Technology -- Risk assessment -- Periodicals; 658.403
• DOI: 10.1111/risa.12740
• Languages: English
• ISSNs: 0272-4332

Abstract

Abstract: Recent studies showed that climate change and socioeconomic trends are expected to increase flood risks in many regions. However, in these studies, human behavior is commonly assumed to be constant, which neglects interaction and feedback loops between human and environmental systems. This neglect of human adaptation leads to a misrepresentation of flood risk. This article presents an agent‐based model that incorporates human decision making in flood risk analysis. In particular, household investments in loss‐reducing measures are examined under three economic decision models: (1) expected utility theory, which is the traditional economic model of rational agents; (2) prospect theory, which takes account of bounded rationality; and (3) a prospect theory model, which accounts for changing risk perceptions and social interactions through a process of Bayesian updating. We show that neglecting human behavior in flood risk assessment studies can result in a considerable misestimation of future flood risk, which is in our case study an overestimation of a factor two. Furthermore, we show how behavior models can support flood risk analysis under different behavioral assumptions, illustrating the need to include the dynamic adaptive human behavior of, for instance, households, insurers, and governments. The method presented here provides a solid basis for exploring human behavior and the resulting flood risk with respect to low‐probability/high‐impact risks.