Essays on econometric modeling of subjective perceptions of risks in environment and human health

A large body of literature studies the issues of the option price and other ex-antewelfare measures under the microeconomic theory to valuate reductions of risks inherentin environment and human health. However, it does not offer a careful discussion of howto estimate risk reduction values using data, especially the modeling and estimatingindividual perceptions of risks present in the econometric models. The central theme ofmy dissertation is the approaches taken for the empirical estimation of probabilistic risksunder alternative assumptions about individual perceptions of risk involved: theobjective probability, the Savage subjective probability, and the subjective distributionsof probability. Each of these three types of risk specifications is covered in one of thethree essays.The first essay addresses the problem of empirical estimation of individualwillingness to pay for recreation access to public land under uncertainty. In this essay Ideveloped an econometric model and applied it to the case of lottery-rationed huntingpermits. The empirical result finds that the model correctly predicts the responses of84% of the respondents in the Maine moose hunting survey.The second essay addresses the estimation of a logit model for individual binarychoices that involve heterogeneity in subjective probabilities. For this problem, Iintroduce the use of the hierarchical Bayes to estimate, among others, the parameters ofdistribution of subjective probabilities. The Monte Carlo study finds the estimatorasymptotically unbiased and efficient. The third essay addresses the problem of modeling perceived mortality risksfrom arsenic concentrations in drinking water. I estimated a formal model that allows forambiguity about risk. The empirical findings revealed that perceived risk was positivelyassociated with exposure levels and also related individuating factors, in particularsmoking habits and one’s current health status. Further evidence was found that thevariance of the perceived risk distribution is non-zero.In all, the three essays contribute methodological approaches and provideempirical examples for developing empirical models and estimating value of riskreductions in environment and human health, given the assumption about theindividual’s perceptions of risk, and accordingly, the reasonable specifications of risksinvolved in the models.