Social Willingness to Pay, Mortality Risks and Contingent Valuation
AbstractThe Willingness-to-Pay approach is the basic justfication 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 InfoPaper provided by Stony Brook University, Department of Economics in its series Department of Economics Working Papers with number 03-03.
Date of creation: 2003
Date of revision:
Other versions of this item:
- 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, 07.
- 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
This paper has been announced in the following NEP Reports:
- NEP-HEA-2003-07-13 (Health Economics)
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