Economic Analysis of Severe Industrial Hazards

This text is concerned with the economics of potentially fatal industrial hazards, namely the prospect of very unlikely, yet catastrophic, incidents. The first part of the analysis is devoted to the microeconomic representation of the relevant risk-preference patterns displayed by both endangered individuals as well as insurers exposed to risk on the basis of the von Neumann-Morgenstern framework. The second part is concerned with a standard microeconomic assessment of the welfare-impact of industrial facilities constituting a severe industrial hazard. Particular attention is paid to the economic investigation into insurance regulatory policy-instruments aimed at correcting risk-externalities created by the risk-emiting sector. Thus, the book serves two primary objectives: to provide a better theoretical understanding and modelling of the economic nature of the problem constituted by severe industrial hazards; and to develop regulatory concepts by means of adroitly instrumentalizing the incentives provided by the insurance sector and the law of tort.