Flood Risk Perceptions: Accuracy, Determinants, and the Role of Probability Weighting

Abstract

This study analyzes survey data of US east coast homeowners to characterize accuracy and determinants of homeowner flood risk (mis)perceptions. Using an array of instruments, we assess subjective risk perceptions and compare them to objective risk estimates. Reduced-form regressions suggest flood experience, worry, coastal tenure, education, primary homeownership, income, and wealth influence relative perceptions of risk. Common probability weighting functions do not fit the divergence in risk perceptions, suggesting that the source of the probability distortions is most likely due to misperceiving the true risk rather than a widespread behavioral heuristic.

Keywords: Natural Hazards, Risk Perceptions, Flood Risk, Probability Weighting

JEL Classification: Q54, D81