Social Willingness to Pay, Mortality Risks and Contingent Valuation
AbstractThe Willingness-to-Pay approach is the basic justification for the use of the Contingent Valuation method to evaluate public mortality risk reduction programs. However, aggregating unweighted willingness-to-pay is a valid method only when individuals have the same marginal value of money, an unrealistic assumption in the presence of heterogeneity. We show that heterogeneity on wealth and baseline risk (respectively on risk reduction) leads to systematically overestimate (respectively underestimate) the social value of a risk reduction program. Using a recently published Contingent Valuation analysis, we find this overestimation to be quite modest though, approximately 15% in an upper bound case.
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Bibliographic InfoArticle provided by Springer in its journal Journal of Risk and Uncertainty.
Volume (Year): 29 (2004)
Issue (Month): 1 (07)
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Web page: http://www.springerlink.com/link.asp?id=100299
Other versions of this item:
- Olivier Armantier & Nicolas Treich, 2003. "Social Willingness to Pay, Mortality Risks and Contingent Valuation," Department of Economics Working Papers 03-03, Stony Brook University, Department of Economics.
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- H82 - Public Economics - - Miscellaneous Issues - - - Governmental Property
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