Economic Decision Guide Software (EDGe$) with Loss Amplification and Risk Aversion: Wildfire Urban Interface (WUI) Case Studies

Published

November 1, 2023

Author(s)

Sherief Elsibaie, Bilal Ayyub, Jennifer Helgeson, Christina Gore, David Butry

Abstract

This report demonstrates by examples and case study as a proof of concept the use of loss amplification and risk aversion in benefit cost analysis (BCA) for community resilience planning. The report uses the NIST Economic Decision Guide Software (EDGe$) Online Tool, which assesses the economic feasibility of community resilience alternatives. Loss amplification arises from a catastrophe modeling method used to represent the increased costs associated with repair activity during a demand surge after a large catastrophe. Risk aversion is a measure of a community's (or other entity's) preference to avoid uncertainty. Risk aversion parameters can be used to compute certainty equivalent payoffs from uncertain payoffs and specific levels of risk aversion. A fictitious case study of wildfire disaster planning of a wildland-urban interface (WUI) is employed to demonstrate these two model enhancements (i.e., loss amplification and risk aversion) and their effects on the economic indicator outputs from EDGe$. The presented case study evaluates a binary development choice related to the resilience of a large presidential library from the perspective of two neighboring communities.

Citation

Special Publication (NIST SP) - 1296

Report Number

1296

NIST Pub Series

Special Publication (NIST SP)

Pub Type

NIST Pubs

Download Paper

https://doi.org/10.6028/NIST.SP.1296

Local Download

Keywords

Benefit-cost analysis, community resilience, economic analysis, economic decision tool, loss amplification, demand surge, risk attitude, risk aversion, online application, online app, resilience, wildland urban interface

Citation

Elsibaie, S. , Ayyub, B. , Helgeson, J. , Gore, C. and Butry, D. (2023), Economic Decision Guide Software (EDGe$) with Loss Amplification and Risk Aversion: Wildfire Urban Interface (WUI) Case Studies, Special Publication (NIST SP), National Institute of Standards and Technology, Gaithersburg, MD, [online], https://doi.org/10.6028/NIST.SP.1296, https://tsapps.nist.gov/publication/get_pdf.cfm?pub_id=956723 (Accessed November 21, 2024)