Using Experimental Economics to Examine Wildfire Insurance and Averting Decisions in the Wildland–Urban Interface

Abstract

In response to growing wildfire concerns in the U.S. West and elsewhere, public land management agencies are promoting a variety of programs to reduce the risk exposure of homeowners to catastrophic wildfires. Experimental economics, using laboratory markets with real payoffs, provides a unique, low-cost tool for examining how changes in various policies or institutional arrangements may affect complex decision making. In this article we present the initial results of our ongoing efforts to explore the factors that influence the willingness to pay for insurance and risk-averting activities. Using significant dollar payoffs and recruited subjects, the experimental setting mimics the decision processes faced by individual homeowners located in the wildland–urban interface (WUI) and is very context rich. To demonstrate the potential uses of market experiments as part of the larger social sciences toolkit to inform policy, we present preliminary results from a set of illustrative treatments.