Sometimes one's choices may involve catastrophic decisions and bear great risk and yet there can be no clear answer. For example, if a person gets a divorce, shutters a plant, sells a losing investment, or closes their business, will he or she be better off? The following case incorporates nearly all of the material you have covered this far and presents an example of one such choice where nearly all of the alternatives have a significant downside risk.

Review the following information from the article "A Cost-Benefit Analysis of the New Orleans Flood Protection System" by Stéphane Hallegatte (2005):

· Hallegatte, an environmentalist, assigns a probability (p) of a Katrina-like hurricane of 1/130 in his cost-benefit analysis for flood protection. However, the levees that protect New Orleans also put other regions at greater risk. You may assume the frequency of other floods is greater than Katrina-like events (Vastag & Rein, 2011).

· The new levees that were built in response to Katrina cost approximately fourteen billion dollars (in 2010). This is in addition to the direct costs of Katrina (eighty-one billion dollars in 2005).

· 50 percent of New Orleans is at or below sea level.

· A 100-year event means that there is a 63 percent chance that such an event will occur within a 100-year period.

Part A:

· Analyze the economics of New Orleans in light of the above parameters and develop your own Cost-Benefit Analysis (CBA) for rebuilding.

· Evaluate the value of the CBA for each constituency and integrate these estimates into a scenario model and/or decision tree. Analyze the results.

· Clearly each of these constituencies may both overlap and be prey to a variety of group dynamics internally. For one of these options, discuss the decision pitfalls to which they may be susceptible and make a recommendation on how to alleviate these pressures.

· Starting with your CBA, estimate the relevant expected utility for the interested constituencies.

Part B:

· Make a case for or against rebuilding the city of New Orleans. This should be an executive summary be concise and brief. Include exhibits.

· Whether you are for or against, discuss how social heuristics could be used to your advantage, both ethically and unethically, in making your case. You may choose to fill the role.