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The Value of Private Risk Versus the Value of Public Risk: An Experimental Analysis of the Johannesson et al. Conjecture

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Author Info
Messer, Kent D.
Poe, Gregory L.
Schulze, William D.
Abstract

In 1996 Johannesson et al. published a paper in this journal entitled “The Value of Private Safety versus the Value of Public Safety.” Based on preliminary evidence from a hypothetical contingent valuation study, these authors argue that consumers behave as “pure altruists” and reject the notion of paternalistic preferences for safety in a coercive tax setting. These pure altruists consider the cost of a program that might be imposed on other voters when they decide whether to vote for or against public safety programs. The authors conclude that further empirical research in this area is warranted. This paper presents a set of laboratory economics experiments to test Johannesson et al.’s conjecture under controlled conditions in which participants face an actual risk of financial loss. The laboratory results extend those of Johannesson et al., providing strong evidence of pure altruism but limited support for paternalistic altruism for risk.

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Paper provided by Cornell University, Department of Applied Economics and Management in its series Working Papers with number 51141.

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Date of creation: 10 Aug 2008
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Handle: RePEc:ags:cudawp:51141

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Related research
Keywords: Altruism; risk; voting; public goods; Research Methods/ Statistical Methods; Risk and Uncertainty; D81; D64; H41; C91; C92; D72;

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  1. Gary Charness & Matthew Rabin, 2002. "Understanding Social Preferences With Simple Tests," The Quarterly Journal of Economics, MIT Press, vol. 117(3), pages 817-869, August. [Downloadable!] (restricted)
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  2. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December. [Downloadable!]
  3. Irwin, Julie R, et al, 1998. "Payoff Dominance vs. Cognitive Transparency in Decision Making," Economic Inquiry, Oxford University Press, vol. 36(2), pages 272-85, April.
  4. Glenn W. Harrison & Eric Johnson & Melayne M. McInnes & E. Elisabet Rutstrom, 2005. "Risk Aversion and Incentive Effects: Comment," American Economic Review, American Economic Association, vol. 95(3), pages 897-901, June. [Downloadable!]
  5. Johansson, Per-Olov, 1994. "Altruism and the value of statistical life: Empirical implications," Journal of Health Economics, Elsevier, vol. 13(1), pages 111-118, March. [Downloadable!] (restricted)
  6. Richard Carson & Theodore Groves, 2007. "Incentive and informational properties of preference questions," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 37(1), pages 181-210, May. [Downloadable!] (restricted)
  7. Jorge E. Araña & Carmelo J. León, 2002. "Willingness to pay for health risk reduction in the context of altruism," Health Economics, John Wiley & Sons, Ltd., vol. 11(7), pages 623-635. [Downloadable!]
  8. Theodore C. Bergstrom, 2004. "Benefit-Cost in a Benevolent Society," Public Economics 0405006, EconWPA. [Downloadable!]
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  9. Flores, Nicholas E., 2002. "Non-paternalistic altruism and welfare economics," Journal of Public Economics, Elsevier, vol. 83(2), pages 293-305, February. [Downloadable!] (restricted)
  10. Jones-Lee, M W, 1991. " Altruism and the Value of Other People's Safety," Journal of Risk and Uncertainty, Springer, vol. 4(2), pages 213-19, April.
  11. Johannesson, Magnus & Johansson, Per-Olov & O'Conor, Richard M., 1996. "The Value of Private Safety versus the Value of Public Safety," Working Paper Series in Economics and Finance 103, Stockholm School of Economics.
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  12. Deacon, Robert T & Shapiro, Perry, 1975. "Private Preference for Collective Goods Revealed Through Voting on Referenda," American Economic Review, American Economic Association, vol. 65(5), pages 943-55, December. [Downloadable!] (restricted)
  13. Matthew Rabin & Richard H. Thaler, 2001. "Anomalies: Risk Aversion," Journal of Economic Perspectives, American Economic Association, vol. 15(1), pages 219-232, Winter. [Downloadable!] (restricted)
  14. Charles A. Holt & Susan K. Laury, 2005. "Risk Aversion and Incentive Effects: New Data without Order Effects," American Economic Review, American Economic Association, vol. 95(3), pages 902-912, June. [Downloadable!]
  15. Jones-Lee, M W, 1992. "Paternalistic Altruism and the Value of Statistical Life," Economic Journal, Royal Economic Society, vol. 102(410), pages 80-90, January. [Downloadable!] (restricted)
  16. Ted Bergstrom, 1982. "When is a Man's Life Worth More Than His Human Capital?," University of California at Santa Barbara, Economics Working Paper Series 1982d, Department of Economics, UC Santa Barbara. [Downloadable!]
  17. Matthew Rabin, 2000. "Risk Aversion and Expected-Utility Theory: A Calibration Theorem," Econometrica, Econometric Society, vol. 68(5), pages 1281-1292, September.
  18. Messer, Kent D. & Poe, Gregory L. & Rondeau, Daniel & Schulze, William D. & Vossler, Christian, 2008. "Social Preferences and Voting: An Exploration Using a Novel Preference Revealing Mechanism," Working Papers 51132, Cornell University, Department of Applied Economics and Management. [Downloadable!]
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