Risk compensation: An analysis of consumer behavior in a risky recreational activity
Abstract
This study analyzes consumer risk-related behavior in a risky recreational activity. An expected utility model is developed. Based on the model, it is predicted that individuals will exhibit compensatory behavior in response to changes in the risk environment. Factors which increase risk lead to compensatory behavior which reduces or offsets to some degree the increased risk; similarly, factors which reduce risk lead to compensatory behavior which offsets to some degree the lower risk. The model is used to analyze all-terrain vehicle (ATV) rider behavior. ATVs are rider-interactive recreational vehicles that have been associated with large numbers of injuries and deaths. A two-equation empirical model is specified in which the accident probabilities and individual safety efforts of ATV drivers are determined simultaneously. Individual safety efforts are measured by helmet use. The equations are estimated in reduced form with binary logit regression models, using data on the characteristics of ATV riders involved in accidents and the general population of riders. Factors associated with changes in accident risk and helmet use are determined and quantified. These results are used to quantify the relative magnitude of the risk compensation response. Finally, the impact of risk information on the ATV market is examined.
Degree
Ph.D.
Advisors
McCarthy, Purdue University.
Subject Area
Economics
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