Section_11_Jenny - Section 11 Outline Announcements Risk...

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Unformatted text preview: Section 11 Outline Announcements Risk Environmental Services Part 1 Problem Set ? Risk What is risk? What is uncertainty? With risk you don't know what the outcome will be for certain, but you do know the likelihood of the di erent possible outcomes. A risk generation function is the relationship between risk and processes that cause it. The theory is in the notes and course readings, so we'll go over an example. Let's go back to the Eucalyptus grove! 1 To ensure that a deadly disease does not destroy the eucalyptus trees (you know they are worth saving due to your rigorous contingent valuation study), a certain chemical has to be used. To ensure the safety of everyone at Berkeley, you want to make sure that the risk of someone getting sick is low. First you need to consider the risk. Suppose 2 factors a ect risk: (1) use of the eucalyptus grove and (2) gender. Let's call risk from use of the eucalyptus grove E and risk from gender G. Suppose the population of the Berkeley campus is 60% male and 40% female. G from being male is 0.03 and G from being female is 0.01. Use of the eucalyptus grove (exposure) has the following risk level: E = 1 with probability 0.3 E = 2 with probability 0.7 You know the values of E from other survey work, they would relate to the portion of the population that has certain levels of exposure. In our example, we assume that 70% of the population has higher exposure ( E = 2 ), and 30% has lower exposure ( E = 1 ). Another important assumption is that gender is uncorrelated with exposure (but for the purposes of this class you don't need to worry about this). Our setup also assumes that having a certain gender, in this case male, makes one more susceptible to the chemical. What other individual characteristics might a ect susceptibility?individual characteristics might a ect susceptibility?...
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This note was uploaded on 09/24/2011 for the course ECON C125 taught by Professor Zelberman during the Spring '09 term at Berkeley.

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Section_11_Jenny - Section 11 Outline Announcements Risk...

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