Prospect Theory, Mitigation and Adaptation to Climate Change

Abstract

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Flood insurance demand and probability weighting: The influences of regret, worry, locus of control and the threshold of concern heuristic

“…CPT has been used frequently to explain results in the previous literature in applications related to natural disasters and water research, e.g., on topics like flood risk [27][28][29][30], drought risk [31,32] and climate change policy [33] [34]. utilized CPT risk preference parameters estimated in previous studies under neutrally framed decisions (e.g.…”

A Systematic Review of the Use of Organization and Management Theories in Climate Change Studies

“…Second, individuals ascribe a disproportionally high value to certain and definite outcomes compared with risky outcomes, due to the ‘certainty effect’ (Kahneman and Tversky, ). According to a theoretical paper by Osberghaus (), prospect theory contributes to the understanding of significant economic puzzles in the climate change debate, such as the different propensity among individuals to undertake actions in favour of climate mitigation and adaptation. If a decision maker perceives the current climate as the reference point, he/she will conceive climate impacts as losses, and adaptation or mitigation as means to reduce such losses.…”

“…Due to loss aversion, this decision maker will ascribe a higher value to climate mitigation and adaptation compared with an individual who has already shifted his/her reference point to the future climate. Similarly, the choice between different climate policies (adaptation versus mitigation) or even different adaptation measures (technical versus financial) may be reference dependent (Osberghaus, ).…”

Chapter 3. Science and Pathways for Bending the Curve

“…Prospect theory is an attractive alternative to expected value as a theory of decision making under conditions of risk, and is potentially relevant to analyzing climate communications opportunities [100]. Tversky and Kahneman have demonstrated in numerous highly controlled experiments that most people systematically violate all of the basic axioms of subjective expected utility theory in their actual decision-making behavior at least some of the time [101].…”

“…The former notion implies a higher value of climate response measures to the decision maker than the latter. Framing can also influence the perception whether an outcome is certain or not [100]. Scientists and climate communicators need to consider how messages are framed, (e.g., in the domain of loss versus gain, reference of today or the future, and high or low probability).…”