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Willingness to Pay and Sensitivity to Time Framing: A Theoretical Analysis and an Application on Car Safety

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  • Henrik Andersson

    ()

  • James Hammitt
  • Gunnar Lindberg
  • Kristian Sundström

Abstract

Stated preference (SP) surveys attempt to obtain monetary values for non-market goods that reflect individuals’ “true” preferences. Numerous empirical studies suggest that monetary values from SP studies are sensitive to survey design and so may not reflect respondents’ true preferences. This study examines the effect of time framing on respondents’ willingness to pay (WTP) for car safety. We explore how WTP per unit risk reduction depends on the time period over which respondents pay and face reduced risk in a theoretical model and by using data from a Swedish contingent valuation survey. Our theoretical model predicts the effect to be nontrivial in many scenarios used in empirical applications. In our empirical analysis we examine the sensitivity of WTP to an annual and a monthly scenario. Our theoretical model predicts the effect from the time framing to be negligible, but the empirical estimates from the annual scenario are about 70 % higher than estimates from the monthly scenario. Copyright Springer Science+Business Media Dordrecht 2013

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Bibliographic Info

Article provided by European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.

Volume (Year): 56 (2013)
Issue (Month): 3 (November)
Pages: 437-456

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Handle: RePEc:kap:enreec:v:56:y:2013:i:3:p:437-456

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Web page: http://www.springerlink.com/link.asp?id=100263

Related research

Keywords: Car safety; Contingent valuation; Time frame; Willingness to pay; C52; D6; I1; Q51;

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Cited by:
  1. Dorte Gyrd-Hansen, 2013. "Using the Stated Preference Technique for Eliciting Valuations: The Role of the Payment Vehicle," PharmacoEconomics, Springer, vol. 31(10), pages 853-861, October.
  2. Henrik Andersson & Arne Risa Hole & Mikael Svensson, 2014. "Valuation of Small and Multiple Health Risks: A Critical Analysis of SP Data Applied to Food and Water Safety," Working Papers 2014005, The University of Sheffield, Department of Economics.

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