You Only Die Once: Managing Discrete Interdependent Risks

31 Pages Posted: 5 Aug 2003 Last revised: 7 Jul 2022

See all articles by Geoffrey M. Heal

Geoffrey M. Heal

Columbia University - Columbia Business School, Finance; National Bureau of Economic Research (NBER)

Howard Kunreuther

National Bureau of Economic Research (NBER); University of Pennsylvania - Wharton Risk Management and Decision Processes Center

Multiple version iconThere are 2 versions of this paper

Date Written: August 2003

Abstract

This paper extends our earlier analysis of interdependent security issues to a general class of problems involving discrete interdependent risks with heterogeneous agents. There is a threat of an event that can only happen once, and the risk depends on actions taken by others. Any agent's incentive to invest in managing the risk depends on the actions of others. Security problems at airlines and in computer networks come into this category, as do problems of risk management in organizations facing the possibility of bankruptcy, and individuals' choices about whether to be vaccinated against an infectious disease. Surprisingly the framework also covers certain aspects of investment in R&D. Here we characterize Nash equilibria with heterogeneous agents and give conditions for tipping and cascading of equilibria.

Suggested Citation

Heal, Geoffrey M. and Kunreuther, Howard C. and Kunreuther, Howard C., You Only Die Once: Managing Discrete Interdependent Risks (August 2003). NBER Working Paper No. w9885, Available at SSRN: https://ssrn.com/abstract=430599

Geoffrey M. Heal (Contact Author)

Columbia University - Columbia Business School, Finance ( email )

3022 Broadway
New York, NY 10027
United States
212-854-6459 (Phone)
212-316-9219 (Fax)

HOME PAGE: http://www.gsb.columbia.edu/faculty/gheal/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Howard C. Kunreuther

University of Pennsylvania - Wharton Risk Management and Decision Processes Center ( email )

3819 Chestnut Street
Suite 130
Philadelphia, PA 19104
United States
215-898-4589 (Phone)

National Bureau of Economic Research (NBER)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
74
Abstract Views
2,023
Rank
233,213
PlumX Metrics