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This paper reviews the state of the art of research on individual decision-making in high-stakes, low-probability settings. A central theme is that resolving high-stakes decisions optimally poses a formidable challenge not only to naı¨ve decision makers, but also to users of more sophisticated tools, such as decision analysis. Such decisions are difficult(More)
This paper provides empirical evidence that risk and ambiguity affect underwriters' decisions on pricing insurance. A field study of primary-insurance underwriters in a random sample of commercial property-and-casualty insurance companies reveals that premiums are significantly higher for risks when there is either ambiguity regarding the probability of a(More)
This article provides a systematic framework for the analysis and improvement of near-miss programs in the chemical process industries. Near-miss programs improve corporate environmental, health, and safety (EHS) performance through the identification and management of near misses. Based on more than 100 interviews at 20 chemical and pharmaceutical(More)
This paper examines the role that insurance coupled with mitigation can play in reducing losses from future natural disasters while at the same time providing funds for recovery. After examining the decision processes of three interested parties who will be at the centerpiece of such a program, residents in hazard-prone areas, insurers/reinsurers and the(More)
Losses from natural disasters have increased in recent years due to growth of population in hazard-prone areas and inadequate enforcement of building codes. This article first examines why homeowners have not voluntarily adopted cost-effective protective measures and have limited interest in purchasing insurance. It then proposes a disaster-management(More)
This paper provides a theoretical explanation for the common observation that people often fail to purchase insurance against low-probability high-loss events even when it is offered at favorable premiums. We hypothesize that individuals maximize expected utility but face an explicit or implicit cost to discovering the true probability of rare events. This(More)