Information and Collective Risk Reduction

Information and nonincreasing absolute risk aversion have been shown to decrease voluntary contributions to traditionally defined public goods. This paper explores whether this result holds for public goods in the form of collective risk reduction programs. Risk differs from traditional public goods in that risk is comprised of two core elements: probability and severity. We find that the impact of information on voluntary contributions now depend on the convexity of the marginal severity function and risk aversion. For probability reduction, risk aversion no longer solely motivates behavior, the convexity of the marginal probability function is the driving force (a measure of aversion to productivity uncertainty). Our results suggest that any policy promoting voluntary provision of collective risk reduction through information will confront complexities which may render the effort ineffective