Risk averse choices of managed beach widths under environmental uncertainty

Abstract

Applying a theoretical geo-economic approach, we examined key factors affecting decisions about the choice of beach width when eroded coastal beaches are being nourished (i.e., when fill is placed to widen a beach). Within this geo-economic framework, optimal beach width is positively related to its values for hazard protection and recreation and negatively related to nourishment costs and the discount rate. Using a dynamic modeling framework, we investigated the time paths of beach width and nourishment that maximized net present value under an accelerating sea level. We then analyzed how environmental uncertainty about expected future beach width, arising from natural shoreline dynamics, intermittent large storms, or sea-level rise, leads to economic choices favoring narrower beaches. Risk aversion can affect a coastal property owner's choice of beach width in contradictory ways: the expected benefits of hazard protection must be balanced against the expected costs of repeated nourishment actions.