Risk perceptions and investment for disaster mitigation by individual households

Abstract

An individual's perceived risk level will be getting smaller as time passes until he/she experiences the disaster, because individuals can only experience normal state in which no disaster occurs before a disaster occurs. Therefore, their perceived levels of disaster risk are monotonic decreasing with time by their leaning through their experiences, even though the objective frequency is not changed. The paper aims at illustrating difficulties involved by perception bias upon disaster risk as to encourage individual investment for anti-disaster mitigation. Risk perception process of each individual under disaster risk is modeled as a rational learning process using the Bayesian leaning process. Through mathematical analysis, the paper concludes by stating the major findings and future tasks as to encourage individual investment for anti-disaster mitigation.