Optimal management of the flood risks of floodplain development

► Flood risks are modeled as unidirectional externalities of floodplain development. ► The model is calibrated by various types of economic, hydrological, landcover data. ► The social optimal size of developed floodplains is smaller than the private one. ► Price-based instruments can lead to outcomes much closer to the social optimum. ► Price-based instruments are robust to uncertainties of model measurement errors.