Uncertain Choices in Environmental Contexts

Wildfires have been identified as an increasing climate change risk in forestry. The effect of climate change is already being seen in changing weather patterns and climate scientists are predicting that it will also result in an increase in the frequency & severity of wildfires. In this context, it is not clear whether optimal decisions are being made to insure forests. Decisions related to whether, and by how much, to insure a forest against risks, such as wildfires, are often influenced by how “reliable” the probability estimate of a risk is and by how an individual evaluates this probability. The risks facing long-lived natural resources under climate change are subject to significant uncertainty, called “ambiguity”. 

The project helps answer the question of how ambiguity aversion affects forest-risk insurance uptake. Furthermore, it will also shed light on how individual heterogeneity (e.g. prior experience) affects this link.