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Proportionality of willingness to pay to small changes in risk - The impact of attitudinal factors in scope tests

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  • Andrea M. Leiter

    ()

  • Gerald J. Pruckner

    ()

Abstract

Sensitivity (proportionality) of willingness to pay to (small) risk changes is often used as a criterion to test for valid measures of economic preferences. In a contingent valuation (CV) study conducted in Austria, 1,005 respondents were asked their willingness to pay (WTP) for preventing an increase in the risk of being killed in an avalanche of 1/42,500 and 3/42,500 respectively. WTP for the higher variation in risk is significantly greater than WTP for the lower risk change. We find evidence that those respondents who have had personal experience of avalanches in recent years combine the information about future risk increase - as provided in the survey - with the observed number of fatal avalanche accidents in the past. Proportionality of WTP holds if such prior experience is taken into account and if attitudinal factors in scope tests are controlled for.

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Bibliographic Info

Paper provided by Faculty of Economics and Statistics, University of Innsbruck in its series Working Papers with number 2007-30.

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Length: 35
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Handle: RePEc:inn:wpaper:2007-30

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Keywords: Contingent valuation; willingness to pay; scope test; sensitivity of WTP.;

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Citations

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Cited by:
  1. Harald Oberhofer, 2012. "Firm Growth, European Industry Dynamics and Domestic Business Cycles," Scottish Journal of Political Economy, Scottish Economic Society, vol. 59(3), pages 316-337, 07.
  2. Wolfgang Brunauer & Stefan Lang & Nikolaus Umlauf, 2010. "Modeling House Prices using Multilevel Structured Additive Regression," Working Papers 2010-19, Faculty of Economics and Statistics, University of Innsbruck.
  3. repec:dgr:uvatin:2012046 is not listed on IDEAS
  4. Octavio Fern?ndez-Amador & Josef Baumgartner & Jes?s Crespo-Cuaresma, 2010. "Milking The Prices: The Role of Asymmetries in the Price Transmission Mechanism for Milk Products in Austria," Working Papers 2010-21, Faculty of Economics and Statistics, University of Innsbruck.
  5. Christoph Rheinberger, 2011. "A mixed logit approach to study preferences for safety on Alpine roads," Working Papers 45387, Institut National de la Recherche Agronomique, France.
  6. Marija Bockarjova & Piet Rietveld & Erik T. Verhoef, 2012. "Scale, Scope and Cognition: Context Analysis of Multiple Stated Choice Experiments on the Values of Life and Limb," Tinbergen Institute Discussion Papers 12-046/3, Tinbergen Institute.
  7. Kimberly Rollins & Mimako Kobayashi, 2010. "Embedding a Field Experiment in Contingent Valuation to Measure Context-Dependent Risk Preferences: Does Prospect Theory Explain Individual Responses for Wildfire Risk?," Working Papers 10-003, University of Nevada, Reno, Department of Economics & University of Nevada, Reno , Department of Resource Economics.
  8. Martin Gaechter & Engelbert Theurl, 2010. "Health Status Convergence at the Local Level: Empirical Evidence from Austria," Working Papers 2010-23, Faculty of Economics and Statistics, University of Innsbruck, revised Mar 2011.
  9. Rollins, Kimberly S. & Kobayashi, Mimako, 2010. "Embedding a Field Experiment in Contingent Valuation to Measure Context-Dependent Risk Preferences: An Application to Wildfire Risk," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61870, Agricultural and Applied Economics Association.
  10. John C. Whitehead & O. Ashton Morgan & William L. Huth & Gregory S. Martin & Richard Sjolander, 2012. "Willingness-to-Pay for Oyster Consumption Mortality Risk Reductions," Working Papers 12-07, Department of Economics, Appalachian State University.

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