University of Southern California

The Effects of Time on Anticipated Consequences of Risks

This project will investigate the role of time delays in the anticipation of risk consequences
involving large impacts, low probabilities, and long temporal distance. Comparison between terrorism risks and natural disasters or monetary risks will be made in terms of the time effects.

Focus Area: Economic Assessment
Theme Area: Consequences & Costs of Terrorism
Principal Investigator: L. Robin Keller
Institution: University of California, Irvine
Student Investigator: Yitong Wang, UCI
Consultant: Tianjun Feng, Fudan University
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Brief Description:

We investigate the role of time in anticipating consequences of monetary, terrorism, or natural disaster risks. Subjective reactions to such risks can vary by how far in the future the anticipated risks seem to be. In phase 1, we will conduct experiments on people's perceptions of risks with large potential impacts, low probabilities and short or long temporal distances, to explore how the saliency of factors (such as probability or magnitude of losses) changes over time. We expect that when two potential risk events vary only in the probability of loss, there will be larger differences in perceived risk between the two events when they occur at a future time than when they occur in the present (as shown in the top figure above from a dam breaking scenario). In contrast, when
risk events vary only by the amount of loss, there will be smaller differences in perceived risks for events in the future (the bottom figure). In phase 2, we will investigate the impacts of ambiguity in the time span (with precise time descriptions vs. ambiguous time descriptions) on anticipated risks. Terrorism risks and natural disaster risks are likely to vary on the level of ambiguity in their possible timing. When the time span in which a potential event might occur is varied in length, we anticipate differences in perceived risk patterns when the time span will occur in the near future vs. in more future time periods.

Objectives: This research will (a) develop a more comprehensive method for assessing perception of risk consequences by including the time of the event; (b) test if and how perceived riskiness varies for events happening at different times; (c) add the time factor in a perceived risk model; (d) test the role of ambiguous time in people's reaction to risky events; and (f) develop a more effective framework for authorities to develop response plans for various types of risks.

Interfaces to other CREATE Projects: This work is related to CREATE's "Dynamic Risk Taking" proposal by C. Fox and W. Schulze's proposal on "Managing Stigma: Risk, Fear and Terrorism." This also is related to time discounting in theme 6.

Interfaces to Other CoEs, National Labs and DHS Projects: We might be able to interface with a START project by Elaine Vaughan on "Communicating Risk of Mass Casualty Terrorism in Diverse Communities."

Concise Major Products and Customers, Transition Opportunities/Plan: Research results will help in developing a useful framework for evaluating of anticipated risk consequences, which can be used by DHS to deliver information on anticipated consequences of future societal or natural risks to the public. Based on our expected results, a practical implication will be that people will tend to underestimate future risks which have a relatively low probability but large potential loss (e.g., terrorist attacks, global warming, flooding, or earthquakes). This will potentially help members of the general public make accurate judgments of future risks and also motivate them to react appropriately to future risks (such as terrorism events and natural disasters due to global warming).

Technical Approach: While people's time preferences (Thaler (1981), Ahlbrecht & Weber (1997)) and risk perception (e.g., Luce 1980, 1981; Weber 1984; Keller et al. 1986) for consequences or gambles have been studied separately, little attention has been placed on people's perceived riskiness for gambles received at different times. Similarly, we know the effect of ambiguity of probabilities and outcomes (e.g., Ho, Keller and Keltyka (2001, 2002)) on choices, but have not examined other ambiguous components of risky events. An innovative and logical next step is to examine the effect of precise time delays or ambiguous time spans on perceived riskiness.

Experimental surveys will be administered to college students and to the general public.
Survey questions will be similar to ones used in the prior work on preferences, but will ask for perceived risk judgments. Consequences will include typical terrorism or natural hazard risks, plus monetary outcomes. Magnitudes of outcomes and probabilities will be varied across questions and across experimental treatments. Answers to demographic and naturalistic risk taking questions will also be collected and analyzed. A perceived risk model will be modified to incorporate results on precise and ambiguous time. A framework for evaluating risk consequences occurring over time will be developed based on the results.

Major Milestones and Dates:

Year 1

  1. Design, pilot, and conduct perceived riskiness survey with risks at different times.
  2. Analyze results and incorporate them into a model of perceived risk.

Year 2

  1. Present at conferences and submit for publication paper(s) on year 1 studies.
  2. Extend, pilot and administer risk surveys to include ambiguous time spans.
  3. Analyze results, show how to incorporate results in a model of perceived risk, then complete and distribute manuscript.
  4. Develop a framework with guidelines for risk communication that build upon the results and prepare it for a practitioner audience.