Aggregation of Individual Risk/Consumption Preference Patterns

The last chapter has been exclusively concerned with individual agents’ willingnesses to pay (option prices) for a lower Φ and θ. As far as the ‘demand side’ is concerned, this knowledge ought to suffice for a welfare analysis of the optimum provison of Φ- and θ- reductions, if Φ- and θ- reductions were private goods. However, from the introduction and chapter A. II it can be conjectured that risk reductions, be it through a reduction of E(μ) or a reduction of the catastrophiness of the hazard, will be polar public goods. Obviously, the ‘publicness’ carries over to reductions of Φ and θ in the ‘reference model’ as these risk-parameters are again assumed to be non-rivaling, non-excludable, not-selfdetermined and equal to all members of the community.