Olof Johansson-Stenman ()
Additional contact information
Olof Johansson-Stenman: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: Box 640, SE 405 30 GÖTEBORG
Abstract: Empirical evidence suggests that people’s risk-perceptions are often systematically biased. This paper develops a simple framework to analyse public policy when this is the case. Expected utility (well-being) is shown to depend on both objective and subjective risks. The latter are important because of the mental suffering associated with the risk and as a basis for corrective taxation and second-best adjustments. Optimality rules for public provision of riskreducing investments, “internality-correcting” taxation and provision of (costly) information to reduce people’s risk-perception bias are presented.
Keywords: Subjective risk; risk management; risk regulation; risk perception bias; terrorism; fat taxes; internalities; cost-benefit analysis; corrective taxation; paternalism
37 pages, January 25, 2006
Full text files
2727 HTML file
Questions (including download problems) about the papers in this series should be directed to Jessica Oscarsson ()
Report other problems with accessing this service to Sune Karlsson ().
RePEc:hhs:gunwpe:0194This page generated on 2024-10-31 13:22:58.