The influence of risk attitudes on suppression spending and on wildland fire program budgeting
Document Type: Journal Article
Author(s): David J. Rossi; Olli-Pekka Kuusela
Publication Year: 2020

Cataloging Information

  • budgetary institutions
  • cost plus net value change
  • downside risk
  • fire management
  • resource allocation
  • risk aversion
  • suppression
Record Maintained By:
Record Last Modified: January 23, 2020
FRAMES Record Number: 60608


Research has suggested that excessive risk aversion is a key driver of rising federal suppression costs. To formally understand how alternative risk attitudes of contracted incident managers can affect a public fire management organization's demand for fire management effort, a two-stage sequential game with complete information is presented. Qualitative expressions of the relevant comparative statics are derived and Monte Carlo simulations are constructed from the parameterized game to quantify these relationships. The simulation exercise reveals that risk aversion and a low tolerance for downside risk can have the similar effect of increasing the relative share of agency expenditures devoted to wildfire suppression. This theoretical analysis exposes the potential for multiple types of risk attitudes to influence an incident commander's demand for suppression effort. Consequently, these determinants of suppression demand also influence the organization's overall allocation of fire management budgets, suppression's expenditure share, and the overall agency exposure to downside risk.

Online Link(s):
Rossi, David J.; Kuusela, Olli-Pekka. 2020. The influence of risk attitudes on suppression spending and on wildland fire program budgeting. Forest Policy and Economics 113:102087.