Title

Averting Behavior

Keywords

Averting behavior; Averting expenditure; Concentration-response function; Defensive behavior; Economic valuation; Health production function; Household production; Joint production; Self-insurance; Self-protection; Value of statistical life; Weak complementarity; Willingness-to-pay

Abstract

Averting behavior refers to actions taken to defend against environmental or other hazards. It is modeled using a household production framework that reflects how ambient hazards and averting actions influence outcomes that people value. The existence of averting behavior has several implications for valuation. (1) Ignoring averting behavior causes understatement of pollution damages if averting behavior increases with pollution, and the hypothesis that averting behavior increases with pollution is supported by empirical research. (2) With no joint production, the marginal value of hazard reduction is determined by the unit cost of an averting action and the marginal rate of technical substitution between the action and the hazard. (3) With no joint production, the value of a nonmarginal hazard reduction is bounded by the change in averting expenditure that would hold home-produced output constant despite the change in hazard. (4) If averting action is weakly complementary to a pollution hazard, then willingness-to-pay equals the pollution-induced change in area behind the compensated demand curve for an averting good. Major empirical obstacles to using averting behavior models for valuation are endogeneity of averting decisions, difficulty of pricing averting actions, and the pervasive problem that averting actions yield joint benefits and costs.

Publication Date

1-1-2013

Publication Title

Encyclopedia of Energy, Natural Resource, and Environmental Economics

Volume

3-3

Number of Pages

321-326

Document Type

Article; Book Chapter

Personal Identifier

scopus

DOI Link

https://doi.org/10.1016/B978-0-12-375067-9.00007-3

Socpus ID

85042726521 (Scopus)

Source API URL

https://api.elsevier.com/content/abstract/scopus_id/85042726521

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