Conference Agenda

The economic value of weather forecasts depends critically on how risk-averse agents incorporate forecast uncertainty relative to realized weather shocks into their decision-making. This paper investigates the safety–efficiency trade-off in air traffic control (ATC) decisions under tropical cyclones in China. Using high-frequency hourly flight trajectory data merged with real-time hourly typhoon forecasts of China, we document that physical observations of wind limits explain only a modest share of capacity reductions. Instead, aviation operational decisions exhibit pronounced behavioral asymmetry: for identical wind conditions, throughput is significantly lower when storms are approaching than receding, and flight cancellations occur well before physical conditions deteriorate beyond safety thresholds. Estimation using structural dynamic choice modeling further reveals that forecast uncertainty substantially amplifies perceived risk in the aviation industry, generating preemptive capacity suppression under forthcoming tropical cyclones beyond what physical constraints require for flight safety. Counterfactual simulations demonstrate that while reducing tropical cyclone forecast uncertainty yields efficiency gains for the aviation industry, the magnitude is constrained by the inherently conservative nature of aviation safety standards.