ABSTRACT
This study reports the results of an economic experiment designed to discover individual perception of risk and the tendency to insure against errors in calibrating the risk. We have chosen the context of straight line wind hazard and the possibility of damage to manufactured housing at a series of induced high wind speeds. The choice of context has special importance in this case because manufactured housing (mobile homes) appears to be less resistant to wind damage in severe windstorms. For example, Hurricane Andrew, the destructive 1992 windstorm that cut across Florida south of Miami destroyed 11 percent of conventionally built homes and 97 percent of the mobile homes in its path. In Homestead, FL, more than 99 percent (1167 of 1176) of mobile homes were completely destroyed (Rappaport, 1993). The National Hurricane Center provides an explanation of the Saffir-Simpson scale in terms of wind speeds and potential damage (Online, available at: nhc.noaa.gov/aboutsshs.shtml September, 2007). For all hurricane categories, damage to mobile homes is distinguished from likely damage to other structures. For example, Category Two hurricanes with estimated wind speeds from 96 to 110 miles per hour (mph) will produce “Some roofing material, door and window damage of buildings” whereas it will produce “considerable damage to mobile homes.” The repeated destruction of mobile homes in minor (lower than Category Three) windstorms led to requirements that manufactured housing adhere to Housing and Urban Development (HUD) Code requirements after 1994. In spite of the increased code requirements, damage assessment teams for the 2004 storm, Hurricane Charley, noted that mobile homes “sustained by far the highest degree of damage” (Adams et al., 2004). Taking this vulnerability into account in conjunction with the fact that manufactured homes represent the fastest growing component of the residential building stock, a better understanding of perception of wind damage risk is important in and of itself. On the one hand, this study presents basic research that examines individuals’ subjective assessments of risk and their propensity to transfer the risk. On the other hand, we seek to measure perception of wind damage risk to two types of factory built housing: modular and manufactured (mobile) construction.
