IDEAS home Printed from https://ideas.repec.org/p/hhs/vtiwps/2006_007.html
   My bibliography  Save this paper

Willingness to Pay for Car Safety: Evidence from Sweden

Author

Abstract

This study estimates a marginal willingness to pay (WTP) function for a road-mortality risk reduction. Observed marginal WTP from the Swedish car market is used and found to be positively correlated with the baseline risk of the cars. Among owner attributes, we find that income increases marginal WTP, whereas background risk reduces marginal WTP. Also, when comparing the estimated monetary value of a non-marginal risk reduction derived from the integral of the marginal WTP-function with an estimate based on marginal WTP, we find that the estimates are different and that the difference is 15-25 percent for larger estimates, but negligible for smaller risk reductions (which is in line with expectations).

Suggested Citation

  • Andersson, Henrik, 2006. "Willingness to Pay for Car Safety: Evidence from Sweden," Working Papers 2006:7, Swedish National Road & Transport Research Institute (VTI).
    • Handle: RePEc:hhs:vtiwps:2006_007
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Anna Alberini & Alistair Hunt & Anil Markandya, 2006. "Willingness to Pay to Reduce Mortality Risks: Evidence from a Three-Country Contingent Valuation Study," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 33(2), pages 251-264, February.
    2. Johansson-Stenman, Olof & Martinsson, Peter, 2006. "Honestly, why are you driving a BMW?," Journal of Economic Behavior & Organization, Elsevier, vol. 60(2), pages 129-146, June.
    3. Henrik Andersson & Nicolas Treich, 2011. "The Value of a Statistical Life," Chapters, in: André de Palma & Robin Lindsey & Emile Quinet & Roger Vickerman (ed.), A Handbook of Transport Economics, chapter 17, Edward Elgar Publishing.
    4. Ivar Ekeland & James J. Heckman & Lars Nesheim, 2004. "Identification and Estimation of Hedonic Models," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages 60-109, February.
    5. Sloan, Frank A. & Kip Viscusi, W. & Chesson, Harrell W. & Conover, Christopher J. & Whetten-Goldstein, Kathryn, 1998. "Alternative approaches to valuing intangible health losses: the evidence for multiple sclerosis1," Journal of Health Economics, Elsevier, vol. 17(4), pages 475-497, August.
    6. Joseph E. Aldy & W. Kip Viscusi, 2007. "Age Differences in the Value of Statistical Life: Revealed Preference Evidence," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 1(2), pages 241-260, Summer.
    7. Janusz R. Mrozek & Laura O. Taylor, 2002. "What determines the value of life? a meta-analysis," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 21(2), pages 253-270.
    8. Eeckhoudt, Louis R. & Hammitt, James K., 2004. "Does risk aversion increase the value of mortality risk?," Journal of Environmental Economics and Management, Elsevier, vol. 47(1), pages 13-29, January.
    9. Olivier Armantier & Nicolas Treich, 2004. "Social Willingness to Pay, Mortality Risks and Contingent Valuation," Journal of Risk and Uncertainty, Springer, vol. 29(1), pages 7-19, July.
    10. Kahn, Shulamit & Lang, Kevin, 1988. "Efficient Estimation of Structural Hedonic Systems," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 29(1), pages 157-166, February.
    11. Kevin J. Boyle & P. Joan Poor & Laura O. Taylor, 1999. "Estimating the Demand for Protecting Freshwater Lakes from Eutrophication," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(5), pages 1118-1122.
    12. Heckman, James J. & Matzkin, Rosa & Nesheim, Lars, 2003. "Simulation and Estimation of Hedonic Models," IZA Discussion Papers 843, Institute of Labor Economics (IZA).
    13. Alberini, Anna & Cropper, Maureen & Krupnick, Alan & Simon, N.B.Nathalie B., 2004. "Does the value of a statistical life vary with age and health status? Evidence from the US and Canada," Journal of Environmental Economics and Management, Elsevier, vol. 48(1), pages 769-792, July.
    14. Hammitt, James K & Graham, John D, 1999. "Willingness to Pay for Health Protection: Inadequate Sensitivity to Probability?," Journal of Risk and Uncertainty, Springer, vol. 18(1), pages 33-62, April.
    15. Han Bleichrodt & Louis Eeckhoudt, 2006. "Willingness to pay for reductions in health risks when probabilities are distorted," Health Economics, John Wiley & Sons, Ltd., vol. 15(2), pages 211-214, February.
    16. Eeckhoudt, Louis R & Hammitt, James K, 2001. "Background Risks and the Value of a Statistical Life," Journal of Risk and Uncertainty, Springer, vol. 23(3), pages 261-279, November.
    17. Rosen, Sherwin, 1988. "The Value of Changes in Life Expectancy," Journal of Risk and Uncertainty, Springer, vol. 1(3), pages 285-304, September.
    18. Henrik Andersson, 2005. "The Value of Safety as Revealed in the Swedish Car Market: An Application of the Hedonic Pricing Approach," Journal of Risk and Uncertainty, Springer, vol. 30(3), pages 211-239, May.
    19. Viscusi, W Kip & Aldy, Joseph E, 2003. "The Value of a Statistical Life: A Critical Review of Market Estimates throughout the World," Journal of Risk and Uncertainty, Springer, vol. 27(1), pages 5-76, August.
    20. Viscusi, W Kip & Evans, William N, 1990. "Utility Functions That Depend on Health Status: Estimates and Economic Implications," American Economic Review, American Economic Association, vol. 80(3), pages 353-374, June.
    21. Epple, Dennis, 1987. "Hedonic Prices and Implicit Markets: Estimating Demand and Supply Functions for Differentiated Products," Journal of Political Economy, University of Chicago Press, vol. 95(1), pages 59-80, February.
    22. Ivar Ekeland & James J. Heckman & Lars Nesheim, 2002. "Identifying Hedonic Models," American Economic Review, American Economic Association, vol. 92(2), pages 304-309, May.
    23. Mats Wilhelmsson, 2000. "The Impact of Traffic Noise on the Values of Single-family Houses," Journal of Environmental Planning and Management, Taylor & Francis Journals, vol. 43(6), pages 799-815.
    24. Brookshire, David S & Thayer. Mark A & Tschirhart, John & Schulze, William D, 1985. "A Test of the Expected Utility Model: Evidence from Earthquake Risks," Journal of Political Economy, University of Chicago Press, vol. 93(2), pages 369-389, April.
    25. Persson, Ulf & Norinder, Anna & Hjalte, Krister & Gralén, Katarina, 2001. "The Value of a Statistical Life in Transport: Findings from a New Contingent Valuation Study in Sweden," Journal of Risk and Uncertainty, Springer, vol. 23(2), pages 121-134, September.
    26. repec:dau:papers:123456789/6486 is not listed on IDEAS
    27. Diamond, Douglas Jr. & Smith, Barton A., 1985. "Simultaneity in the market for housing characteristics," Journal of Urban Economics, Elsevier, vol. 17(3), pages 280-292, May.
    28. Alison P. Hagy, 1998. "The Demand for Child Care Quality: An Hedonic Price Theory Approach," Journal of Human Resources, University of Wisconsin Press, vol. 33(3), pages 683-710.
    29. Jones-Lee, Michael W, 1974. "The Value of Changes in the Probability of Death or Injury," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 835-849, July/Aug..
    30. Milton C. Weinstein & Donald S. Shepard & Joseph S. Pliskin, 1980. "The Economic Value of Changing Mortality Probabilities: A Decision-Theoretic Approach," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 94(2), pages 373-396.
    31. Atkinson, Scott E & Halvorsen, Robert, 1990. "The Valuation of Risks to Life: Evidence from the Market for Automobiles," The Review of Economics and Statistics, MIT Press, vol. 72(1), pages 133-136, February.
    32. Dreyfus, Mark K & Viscusi, W Kip, 1995. "Rates of Time Preference and Consumer Valuations of Automobile Safety and Fuel Efficiency," Journal of Law and Economics, University of Chicago Press, vol. 38(1), pages 79-105, April.
    33. Johansson, Per-Olov, 2002. "On the Definition and Age-Dependency of the Value of a Statistical Life," Journal of Risk and Uncertainty, Springer, vol. 25(3), pages 251-263, November.
    34. Drazen Prelec, 1998. "The Probability Weighting Function," Econometrica, Econometric Society, vol. 66(3), pages 497-528, May.
    35. Bartik, Timothy J, 1987. "The Estimation of Demand Parameters in Hedonic Price Models," Journal of Political Economy, University of Chicago Press, vol. 95(1), pages 81-88, February.
    36. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
    37. Brown, James N & Rosen, Harvey S, 1982. "On the Estimation of Structural Hedonic Price Models," Econometrica, Econometric Society, vol. 50(3), pages 765-768, May.
    38. Tzipi Eshet & Mira Baron & Mordechai Shechter, 2007. "Exploring Benefit Transfer: Disamenities of Waste Transfer Stations," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 37(3), pages 521-547, July.
    39. repec:reg:rpubli:282 is not listed on IDEAS
    40. Freeman, A Myrick, III, 1974. "Air Pollution and Property Values: A Further Comment," The Review of Economics and Statistics, MIT Press, vol. 56(4), pages 554-556, November.
    41. V. Kerry Smith & Mary F. Evans & Hyun Kim & Donald H. Taylor, 2004. "Do the Near-Elderly Value Mortality Risks Differently?," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 423-429, February.
    42. Helen Tauchen & Ann Dryden Witte, 2001. "Estimating Hedonic Models: Implications of the Theory," NBER Technical Working Papers 0271, National Bureau of Economic Research, Inc.
    43. Ted Gayer & James T. Hamilton & W. Kip Viscusi, 2000. "Private Values Of Risk Tradeoffs At Superfund Sites: Housing Market Evidence On Learning About Risk," The Review of Economics and Statistics, MIT Press, vol. 82(3), pages 439-451, August.
    44. Bartik, Timothy J, 1987. "Estimating Hedonic Demand Parameters with Single Market Data: The Problems Caused by Unobserved Tastes," The Review of Economics and Statistics, MIT Press, vol. 69(1), pages 178-180, February.
    45. Donald S. Shepard & Richard J. Zeckhauser, 1984. "Survival versus Consumption," Management Science, INFORMS, vol. 30(4), pages 423-439, April.
    46. Pratt, John W & Zeckhauser, Richard J, 1996. "Willingness to Pay and the Distribution of Risk and Wealth," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 747-763, August.
    47. Ohsfeldt, Robert L & Smith, Barton A, 1985. "Estimating the Demand for Heterogeneous Goods," The Review of Economics and Statistics, MIT Press, vol. 67(1), pages 165-171, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Emmanouil Mentzakis & Mandy Ryan & Paul McNamee, 2014. "Modelling Heterogeneity and Uncertainty in Contingent Valuation: an Application to the Valuation of Informal Care," Scottish Journal of Political Economy, Scottish Economic Society, vol. 61(1), pages 1-25, February.
    2. Henrik Andersson & Lina Jonsson & Mikael Ögren, 2010. "Property Prices and Exposure to Multiple Noise Sources: Hedonic Regression with Road and Railway Noise," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 45(1), pages 73-89, January.
    3. Henrik Andersson & Nicolas Treich, 2011. "The Value of a Statistical Life," Chapters, in: André de Palma & Robin Lindsey & Emile Quinet & Roger Vickerman (ed.), A Handbook of Transport Economics, chapter 17, Edward Elgar Publishing.
    4. Haddak, Mohamed Mouloud & Lefèvre, Marie & Havet, Nathalie, 2016. "Willingness-to-pay for road safety improvement," Transportation Research Part A: Policy and Practice, Elsevier, vol. 87(C), pages 1-10.
    5. Henrik Andersson & James Hammitt & Gunnar Lindberg & Kristian Sundström, 2013. "Willingness to Pay and Sensitivity to Time Framing: A Theoretical Analysis and an Application on Car Safety," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 56(3), pages 437-456, November.
    6. James O’Brien, 2018. "Age, autos, and the value of a statistical life," Journal of Risk and Uncertainty, Springer, vol. 57(1), pages 51-79, August.
    7. Tesfaye, Meneyahel Z. & Balana, Bedru B. & Bizimana, Jean-Claude, 2021. "Assessment of smallholder farmers’ demand for and adoption constraints to small-scale irrigation technologies: Evidence from Ethiopia," Agricultural Water Management, Elsevier, vol. 250(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Henrik Andersson & Nicolas Treich, 2011. "The Value of a Statistical Life," Chapters, in: André de Palma & Robin Lindsey & Emile Quinet & Roger Vickerman (ed.), A Handbook of Transport Economics, chapter 17, Edward Elgar Publishing.
    2. Henrik Andersson & James Hammitt & Gunnar Lindberg & Kristian Sundström, 2013. "Willingness to Pay and Sensitivity to Time Framing: A Theoretical Analysis and an Application on Car Safety," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 56(3), pages 437-456, November.
    3. Andersson, Henrik, 2006. "Willingness to Pay for Road Safety and Estimates of the Risk of Death: Evidence from a Swedish Contingent Valuation Study," Working Papers 2006:5, Swedish National Road & Transport Research Institute (VTI).
    4. Andersson, Henrik, 2013. "Consistency in preferences for road safety: An analysis of precautionary and stated behavior," Research in Transportation Economics, Elsevier, vol. 43(1), pages 41-49.
    5. Hultkrantz, Lars & Svensson, Mikael, 2012. "The value of a statistical life in Sweden: A review of the empirical literature," Health Policy, Elsevier, vol. 108(2), pages 302-310.
    6. Andrea Leiter, 2011. "Age effects in monetary valuation of reduced mortality risks: the relevance of age-specific hazard rates," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 12(4), pages 331-344, August.
    7. Treich, Nicolas, 2010. "The value of a statistical life under ambiguity aversion," Journal of Environmental Economics and Management, Elsevier, vol. 59(1), pages 15-26, January.
    8. Henrik Andersson & James K. Hammitt & Kristian Sundström, 2015. "Willingness to Pay and QALYs: What Can We Learn about Valuing Foodborne Risk?," Journal of Agricultural Economics, Wiley Blackwell, vol. 66(3), pages 727-752, September.
    9. Henrik Andersson & Mikael Svensson, 2008. "Cognitive ability and scale bias in the contingent valuation method," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 39(4), pages 481-495, April.
    10. James Hammitt, 2013. "Admissible utility functions for health, longevity, and wealth: integrating monetary and life-year measures," Journal of Risk and Uncertainty, Springer, vol. 47(3), pages 311-325, December.
    11. Daniel Bauer & Darius Lakdawalla & Julian Reif, 2018. "Mortality Risk, Insurance, and the Value of Life," NBER Working Papers 25055, National Bureau of Economic Research, Inc.
    12. James O’Brien, 2018. "Age, autos, and the value of a statistical life," Journal of Risk and Uncertainty, Springer, vol. 57(1), pages 51-79, August.
    13. James Hammitt & Jin-Tan Liu, 2004. "Effects of Disease Type and Latency on the Value of Mortality Risk," Journal of Risk and Uncertainty, Springer, vol. 28(1), pages 73-95, January.
    14. Herrera-Araujo, Daniel & Rochaix, Lise, 2020. "Does the Value per Statistical Life vary with age or baseline health? Evidence from a compensating wage study in France," Journal of Environmental Economics and Management, Elsevier, vol. 103(C).
    15. Antoine Bommier & Bertrand Villeneuve, 2012. "Risk Aversion and the Value of Risk to Life," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 79(1), pages 77-104, March.
    16. Dennis Guignet & Anna Alberini, 2015. "Can Property Values Capture Changes in Environmental Health Risks? Evidence from a Stated Preference Study in Italy and the United Kingdom," Risk Analysis, John Wiley & Sons, vol. 35(3), pages 501-517, March.
    17. Cameron, Trudy Ann & DeShazo, J.R., 2013. "Demand for health risk reductions," Journal of Environmental Economics and Management, Elsevier, vol. 65(1), pages 87-109.
    18. James K. Hammitt, 2002. "QALYs Versus WTP," Risk Analysis, John Wiley & Sons, vol. 22(5), pages 985-1001, October.
    19. Kip Viscusi, W. & Aldy, Joseph E., 2007. "Labor market estimates of the senior discount for the value of statistical life," Journal of Environmental Economics and Management, Elsevier, vol. 53(3), pages 377-392, May.
    20. Olivier Marchand & Eric Skhiri, 1995. "Prix hédoniques et estimation d'un modèle structurel d'offre et de demande de caractéristiques [Une application au marché de la location de logements en France ]," Économie et Prévision, Programme National Persée, vol. 121(5), pages 127-140.

    More about this item

    Keywords

    car safety; hedonic prices; non-marginal willingness to pay; background risk;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • J28 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Safety; Job Satisfaction; Related Public Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hhs:vtiwps:2006_007. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Biblioteket vid VTI or Emil Svensson or Claes Eriksson or Tova Äng (email available below). General contact details of provider: https://edirc.repec.org/data/tevtise.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.