Decision analysis for preventing natural disaster risks

In this paper, we show that a value function under risk is useful to model low probability and high consequence events like earthquake for which expected utility theory is inadequate. First, we assume alternatives to improve buildings, some scenarios of earthquake, costs to improve buildings, probability of death and injury and cost of restoring building's damage for each scenario. Then we show that the value function under risk is an appropriate approach to model and analyze decision making process with low probability and high consequence events. Copyright (C) 1998 IFAC.