MARC Record from Library of Congress

LEADER: 02471nam a22003017a 4500
001 2006619564
003 DLC
005 20060628163002.0
007 cr |||||||||||
008 060628s2006 mau sb 000 0 eng
010 $a 2006619564
040 $aDLC$cDLC
050 00 $aHB1
100 1 $aKousky, Carolyn.
245 10 $aPrivate investment and government protection$h[electronic resource] /$cCarolyn Kousky, Erzo F.P. Luttmer, Richard J. Zeckhauser.
260 $aCambridge, MA :$bNational Bureau of Economic Research,$cc2006.
490 1 $aNBER working paper series ;$vworking paper 12255
538 $aSystem requirements: Adobe Acrobat Reader.
538 $aMode of access: World Wide Web.
500 $aTitle from PDF file as viewed on 6/28/2006.
530 $aAlso available in print.
504 $aIncludes bibliographical references.
520 3 $a"Hurricane Katrina did massive damage because New Orleans and the Gulf Coast were not appropriately protected. Wherever natural disasters threaten, the government -- in its traditional role as public goods provider -- must decide what level of protection to provide to an area. It does so by purchasing protective capital, such as levees for a low-lying city.We show that if private capital is more likely to locate in better-protected areas, then the marginal social value of protection will increase with the level of protection provided. That is, the benefit function is convex, contrary to the normal assumption of concavity. When the government protects and the private sector invests, due to the ill-behaved nature of the benefit function, there may be multiple Nash equilibria. Policy makers must compare them, rather than merely follow local optimality conditions, to find the equilibrium offering the highest social welfare.There is usually considerable uncertainty about the amount of investment that will accompany any level of protection, further complicating the government's choice problem. We show that when deciding on the current level of protection, the government must take account of the option value of increasing the level of protection in the future"--National Bureau of Economic Research web site.
700 1 $aLuttmer, Erzo F.P.
700 1 $aZeckhauser, Richard J.
710 2 $aNational Bureau of Economic Research.
830 0 $aWorking paper series (National Bureau of Economic Research : Online) ;$vworking paper no. 12255.
856 40 $uhttp://papers.nber.org/papers/w12255