TY  - JOUR
AU  - Heal,Geoffrey
AU  - Kunreuther,Howard
TI  - You Only Die Once: Managing Discrete Interdependent Risks
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 9885
PY  - 2003
Y2  - August 2003
UR  - http://www.nber.org/papers/w9885
L1  - http://www.nber.org/papers/w9885.pdf
N1  - Author contact info:
Geoffrey Heal
Graduate School of Business
616 Uris Hall
Columbia University
New York, NY 10027-6902
Tel: 212/854-6459
Fax: 212/316-9219
E-Mail: gmh1@columbia.edu

Howard Kunreuther
Operations and Information Management
The Wharton School
University of Pennsylvania
3730 Walnut Street, 500 JMHH
Philadelphia, PA 19104-6366
Tel: 215/898-4589
Fax: 215/573-2130
E-Mail: kunreuther@wharton.upenn.edu
AB  - This paper extends our earlier analysis of interdependent security issues to a general class of problems involving discrete interdependent risks with heterogeneous agents. There is a threat of an event that can only happen once, and the risk depends on actions taken by others. Any agent's incentive to invest in managing the risk depends on the actions of others. Security problems at airlines and in computer networks come into this category, as do problems of risk management in organizations facing the possibility of bankruptcy, and individuals' choices about whether to be vaccinated against an infectious disease. Surprisingly the framework also covers certain aspects of investment in R&D. Here we characterize Nash equilibria with heterogeneous agents and give conditions for tipping and cascading of equilibria.
ER  -