Risk-averse decision-making for civil infrastructure exposed to low-probability, high-consequence events

Quantitative analysis and assessment of risk to civil infrastructure has two components: probability of a potentially damaging event and consequence of damage, measured in terms of financial or human losses. Decision models that have been utilized during the past three decades take into account the probabilistic component rationally, but address decision-maker attitudes toward consequences and risk only to a limited degree. The application of models reflecting these attitudes to decisions involving low-probability, high-consequence events that may impact civil infrastructure requires a fundamental understanding of risk acceptance attitudes and how they affect individual and group choices. In particular, the phenomenon of risk aversion may be a significant factor in decisions for civil infrastructure exposed to low-probability events with severe consequences, such as earthquakes, hurricanes or floods. This paper utilizes cumulative prospect theory to investigate the role and characteristics of risk-aversion in assurance of structural safety.