An Analysis of the Possibility of Retrofitting Level Optimization Based on Information Economy Approach, Uncertainty and Behavioral Economics Estimation

From the perspective of conventional neoclassical theories, consumers, corporations and economic factors are maximizer and optimizer.Therefore, without the need for interference of any external factor, they maximize the utility, profitability and, consequently, social welfare. But it is claimed that in Iran’s housing industry, the level of building retrofitting, especially the seismic resistance level, is not optimal, which means that the optimizing Agents spend Budget less than the optimal rate for this task. Accepting this claim, this paper tries to explain why this event is occurred emphasizing the framework of information economics and behavioral economics. This study first examines the cataclysmic events in the Iranian Housing industry, due to the lack of asymmetric information flow between housing producers and consumers, and provides solutions in the form of signaling, screening, and standardization of information. Secondly, the uncertainty effect of earthquake definite risk over retrofitting is analyzed. And, finally, based on some behavioral economics’ assumptions, we attempt to explain how to reduce demands for and costs of retrofitting proportional to the optimal level, and to develop theoretical solutions to the problem.