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Willingness to pay for reductions in health risks under anticipated regret

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  • Zheng, Jiakun

Abstract

In this paper, we study the willingness to pay for reductions in health risks within a framework of anticipated regret. We show that ex post information provision can be a relevant factor for regret theory to account for why people are sometimes so inclined to protect themself against certain types of health risks but not others. In particular, we find that under full resolution of uncertainty disproportionate aversion to large regrets exaggerates willingness to pay estimates. The effect induced by this notion of regret aversion can be interpreted as if regret-averse people overweight risk reductions due to prevention. However, as feedback over forgone acts is missing, the regret aversion effect disappears. Finally, we show that information avoidance induced by regret aversion can significantly bias our evaluation to prefer those health programs that completely eliminate a risk, i.e., the certainty effect.

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  • Zheng, Jiakun, 2021. "Willingness to pay for reductions in health risks under anticipated regret," Journal of Health Economics, Elsevier, vol. 78(C).
  • Handle: RePEc:eee:jhecon:v:78:y:2021:i:c:s0167629621000618
    DOI: 10.1016/j.jhealeco.2021.102476
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    More about this item

    Keywords

    Regret aversion; Willingness to pay; Probability weighting; Health policy; Cost-benefit analysis; Information avoidance;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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