THE ECONOMICS OF ENVIRONMENTAL RISK PERCEPTION, ENDOGENOUS RISK, AND SELF-PROTECTION (PERCEIVED CONTROL, HAZARDS, RISK VALUATION, CONTINGENT VALUATION)

The major goal of environmental economics is to understand how changes in environmental quality affect economic well-being. The key link between environmental quality and economic well-being is environmental perception. Incorporating perception issues in economics provides insights into individual valuation of quality changes. The purpose of this research is to examine environmental hazards and risk evaluation in the context of perceived control, endogenous risk, and self-protection.;Three main areas are theoretically modeled and empirically examined. The three areas are: (i) A comparison of individual contributions to self-protection under certain risk exposure, uncertain risk exposure, and uncertain risk exposure with endogenous risk, (ii) how the availability of self-protection affects an individual's marginal willingness to pay for a reduction in risk, and (iii) how self-protection influences an individual's willingness to pay an option price for future provision of a public good. Five out of twelve theoretical propositions are empirically tested using data from a contingent valuation experiment on Oregon visibility. The five theoretical propositions were not empirically rejected. Given the theoretical framework and empirical evidence, the relevant policy implications for risk management are discussed. Finally, the future research extensions are examined.;Individual risk acceptance is a key aspect of risk perception. A crucial factor in determining risk acceptance is the individual's perceived control over the risk. An individual's valuation of a risk reduction will be influenced by his perceived control over the risk. Perceived control is modeled by endogenizing the risk through a form of self-protection e.g. the individual can control the risk of drinking contaminated water by purchasing a private water filter .