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|Title:||Mad Cows, Terrorism and Junk Food: Should Public Policy Reflect Subjective or Objective Risks?|
|University:||Göteborg University. School of Business, Economics and Law|
|Series/Report no.:||Working Papers in Economics, nr 194|
risk perception bias
|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-co... more|
|Appears in Collections:||Working papers|
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