Martin Tetaz
Palermo Business Review | Nº 11 | 2014
This paper builds on Kanehman’s Prospect Theory, adapting the idea of a reference point to insecurity and neighborhood quality of life. We take advantage of a novel tailored survey to show that as occur with income gains and losses, the value function associated with neighborhood quality of life is steeper in the domain of losses, than in the space of gains, when it comes to the position of a neighborhood relative to others, in terms of security. The finding has profound implications in security policies, because unless the policy is designed to avoid spillovers, the welfare aggregated effect will be negative.