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Environmental Engineering Research 2022;27(6): 210368 DOI: https://doi.org/10.4491/eer.2021.368
Game theoretic approach for flood risk management considering a financial model
Mahsa Moosakhaani1, Lida Salimi1  , Mohammad Taghi Sadatipour1, Mohammad Hossein Niksokhan2, and Mohammad Rabbani1
1Department of Environmental Engineering, Faculty of Marine Science and Technology, North Tehran Branch, Islamic Azad University, Tehran, Iran
2School of Environment, College of Engineering, University of Tehran, Iran
Corresponding Author: Lida Salimi ,Tel: +98-912-240-14-37, Fax: +98-21-7700-98-48, Email: l_salimi@iau-tnb.ac.ir
Received: August 6, 2021;  Accepted: December 20, 2021.
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In process of flood risk management, there is usually a conflict between the governments, insurance companies and people as players in sharing financial responsibilities, because of how calculate insurance premium, compensation and governmental assistances. In order to this conflict resolution, in this paper a new methodology is proposed based on game theoretic approach by using Nash equilibrium method, that for the first time, the payoff functions of insurance companies and government have been associated to each other. In this method, according to maximization of player's payoffs, the best response has been found and for the first time, comprehensive financial model has been developed for sharing players' financial responsibilities in flood risk management plans. In order to increase the accuracy of flood insurance calculations, the parameters of deductible and franchise have been applied. The key findings indicate, success of flood risk management plans depend on purchasing flood insurance with full coverage and government financial assistances simultaneously. The developed flood insurance plan has most sensitivity to parameters of deductible and insurance rate. This model could be utilized as practical and academic model in flood risk management. The applicability and efficiency of the methodology are examined in Northeast of Tehran as capital of Iran.
Keywords: Game theory | Insurance | Iran | Nash Equilibrium | Strategy
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