Policy design for promoting seismic retrofitting through Nudge

2016 Fiscal Year Final Research Report

• Project/Area Number: 26820214
• Research Category: Grant-in-Aid for Young Scientists (B)
• Allocation Type: Multi-year Fund
• Research Field: Civil engineering project/Traffic engineering
• Research Institution: Kumamoto University
• Principal Investigator: Fujimi Toshio 熊本大学, 大学院先端科学研究部(工), 准教授 (40423024)
• Project Period (FY): 2014-04-01 – 2017-03-31
• Keywords: seismic retrofitting / Nudge / moral hazards

Outline of Final Research Achievements

This paper explores policy design promoting seismic retrofitting through Nudge. The homeowners hesitate to implement seismic retrofitting because they largely overestimate the collapse risk of seismic retrofitted house. This problem can be solved by a warranty that compensates the cost for rebuilding new house if the seismic retrofitted houses collapse due to earthquake. The warranty may cause moral hazard of a house builder to implement seismic retrofitting if the government bears all cost of warranty
To introduce the warranty system for promoting seismic retrofitting, reconstruction cost should be shared by the government and house builder. This research investigates optimal share of reconstruction cost for preventing house builder’s moral hazards with expected utility model and KMM model. The result implies that, for an average house, cost share ratio of the government should be set around 0.6 under both risk and ambiguity to prevent moral hazard.

Free Research Field

防災行動経済学