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Updated: Jul 13, 2026
05:37
An R-Based Landscape Validation of a Competing Risk Model
Published on: September 16, 2022
Modeling interdependent risks
Geoffrey Heal1, Howard Kunreuther
1Columbia Business School, New York, NY 10027, USA. gml@columbia.edu
Summary
Interdependent risks can lead to suboptimal outcomes for all agents. Identifying the minimum critical coalition can shift systems from suboptimal to optimal equilibria efficiently.
Area of Science:
- Game Theory
- Risk Management
- Public Health
Background:
- Individual risk management decisions are influenced by expectations of others' actions.
- Interdependence can lead to collectively suboptimal outcomes, even when agents act rationally.
Purpose of the Study:
- To model interdependent risk management as a game theory problem.
- To identify conditions for transitioning from suboptimal to optimal equilibria.
- To characterize the minimum and cheapest critical coalition for this transition.
Main Methods:
- Game theory modeling, specifically Nash equilibrium analysis.
- Identification and characterization of critical coalitions.
- Application to real-world scenarios like airline security and infectious disease control.
Main Results:
- Conditions are provided for tipping a suboptimal equilibrium to an optimal one.
- The minimum critical coalition is identified as both the smallest and cheapest.
- This coalition offers the most cost-effective way to improve system-wide outcomes.
Conclusions:
- Coordinated action, even by a small group, can resolve collective action problems in risk management.
- The concept of a minimum critical coalition provides a framework for understanding efficient system-wide improvements.
- Findings have implications for policy design in areas requiring collective risk mitigation.
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