For a long time cold weather and geographic isolation protected Alaska from invasive species, but globalization and a changing climate are bringing increased risk. Environmental managers tasked with preventing the spread of invasive species (IS) may do everything they can to prevent the introduction, but travelers, tourists, and companies moving products to Alaska cause IS risk that is difficult for managers to control. Dr. Kevin Berry, assistant professor of Economics and ISER faculty, received $9,535 from the Faculty Initiative Fund to use an experimental economics approach to better understand how individuals decide to take on risk – such as the introduction of invasive species – that could create losses for multiple parties.
“Risky Business: Implications of Decisions Under Uncertainty for Environmental Policy,” will use the UAA Department of Business and Public Policy’s Vernon Smith Economic Science Laboratory to examine how individuals send and respond to price signals and how they weigh risks when making choices. Berry, and his collaborators at the University of Idaho and Trinity University, will also explore the possibilities for market-based solutions to mitigate risk, with an application related to the introduction of IS.
While economic theory suggest that prices include all relevant information in competitive markets, this is not necessarily true when it comes to markets for environmental goods that carry the risk of Invasive Species introduction. Buyers may not know which sellers are using safe practices or risky practices based upon price alone. The effect of uncertainty regarding price, sellers’ profit margins, and costs of risky behavior are all among the factors that will be assessed during the “Risky Business” project.