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ANOR
2016

The strategic interaction between a company and the government surrounding disasters

4 years 3 months ago
The strategic interaction between a company and the government surrounding disasters
We analyze the tradeoff between safety and production. The government chooses safety effort and tax rate in the first stage, and then the company strikes a balance between safety effort and production in the second stage. The government, representing the general public, earns taxes on production. Both players’ safety efforts mitigate the negative impact of a disaster. The disaster probability is modeled as a contest between the disaster magnitude and the two players’ safety efforts. Seven propositions are developed. First, as the safety effort of one player approaches infinity, the marginal change in the other player’s safety effort, with respect to the first player’s safety effort, approaches zero. Second, an infinitely large safety effort by any player causes the disaster probability and the negative impact of the disaster to decrease toward a constant. Third, as one player’s safety effort approaches infinity, the other player’s safety effort approaches zero. Fourth,...
Kjell Hausken, Jun Zhuang 0001
Added 29 Mar 2016
Updated 29 Mar 2016
Type Journal
Year 2016
Where ANOR
Authors Kjell Hausken, Jun Zhuang 0001
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