Are floodings preventable under moral hazard and limites liability?

  1. Oscar Nieto Cerezo 1
  2. Edoardo Patelli 1
  3. Jan Wenzelburger 1
  4. Michael Beer 2
  1. 1 University of Liverpool
    info

    University of Liverpool

    Liverpool, Reino Unido

    ROR https://ror.org/04xs57h96

  2. 2 University of Hannover
    info

    University of Hannover

    Hanóver, Alemania

    ROR https://ror.org/0304hq317

Actas:
13th International Conference on Probabilistic Safety Assessment and Management (PSAM 13)

Año de publicación: 2016

Páginas: 18

Tipo: Aportación congreso

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Resumen

In this paper, we use a mathematical model based on the agency theory to determine the optimal level of discretion granted to a regulatory body. This model reduces the probability of an accident inflicted on the society by resolving a downstream and an upstream moral hazard problem existing in engineering with special attention to the Fukushima nuclear accident. When the regulator and the parliament have conflicting objectives under moral hazard, a pro-industry regulator imposes a cap of the fine below parliament’s optimal inducing the operator to implement lower quality sea defences. This is because the liability rent left to the operator increases with lower quality sea defences. By setting an upper bound to the regulator’s range of feasible decisions, the parliament can encourage the regulator to work in the interest of the broad society.