Proceedings of the Eighth International Conference on Probabilistic Safety Assessment & Management (PSAM)
Risk-Informed Decision Making: Decision Analysis
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- Ris (Zotero)
- Reference Manager
Regulatory agencies are charged with the efficient allocation of scarce resources for purposes such as risk reduction. Cost-benefit analysis (CBA) attempts to provide a rational basis for this by considering benefits and costs in monetary terms. The concepts of willingness-to-pay (WTP) and willingness-to-accept (WTA) allow valuation to extend to non-market benefits such as the value of saving a statistical life (VOSL), calculated as the marginal rate of substitution for risk reduction. Where no market exists for a good, stated preference (SP) surveys may be used to obtain an estimate of WTP/WTA. SP surveys attempt to account for respondents' stated decisions in hypothetical market situations, typically by assuming a probabilistic model. A problem for CBA is that it attempts to account for the diversity of opinion regarding benefits and costs in a single, monetary measure. The present study explores probabilistic inversion as a means to obtain an estimate of WTP for risk reduction on the railways that can capture the full range of values that respondents might adopt in a SP survey. This technique converts a distribution obtained on the outputs of a model (i.e. the SP responses) into a joint distribution on the model parameters (i.e. the attributes of the hypothetical scenario). The results are contrasted with those obtained using a conventional econometric approach. Whilst SP analysis with probabilistic inversion is achievable, technical limitations and ambiguity in the interpretation of the results means that the technique is more suited to preliminary analyses, possibly as a means to inform the selection of distributions for mixed logit analysis.