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An Empirical Model of Demand for Future Health States when Valuing Risk-Mitigating Programs

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Author Info
Trudy Ann Cameron () (Department of Economics, University of Oregon)
J.R. DeShazo (School of Public Policy, UCLA)

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Abstract

We develop a structural option price model in which individuals choose among competing risk-mitigating programs to alter their probability of experiencing future years in various degraded health states. The novel aspects of this model include separate estimates of the marginal utilities of avoiding years of morbidity and lost life-years. With these marginal utilities, we may evaluate a broad spectrum of probabilistic health outcomes over any period of an individualÂ’s future life. The model also reduces potential biases associated with singleperiod, single-risk models typically used to produce estimates of the Value of a Statistical Life (VSL) by allowing individuals to substitute risk mitigation across competing sources of risk and across future years of their lives. We evaluate this model using data from a national survey that contains a choice experiment on demand for the mitigation of illness-specific risks.

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Publisher Info
Paper provided by University of Oregon Economics Department in its series University of Oregon Economics Department Working Papers with number 2004-11.

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Length: 51
Date of creation: 01 Apr 2004
Date of revision: 01 Apr 2004
Handle: RePEc:ore:uoecwp:2004-11

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Related research
Keywords: Value of a Statistical Life (VSL); mortality risk; morbidity risk; health; option price;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Moore, Michael J & Viscusi, W Kip, 1988. "The Quantity-Adjusted Value of Life," Economic Inquiry, Oxford University Press, vol. 26(3), pages 369-88, July.
  2. Gabriel Picone & Frank Sloan & Donald Taylor, 2004. "Effects of Risk and Time Preference and Expected Longevity on Demand for Medical Tests," Journal of Risk and Uncertainty, Springer, vol. 28(1), pages 39-53, January. [Downloadable!] (restricted)
  3. 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 835-49, July/Aug.. [Downloadable!] (restricted)
  4. Rosen, Sherwin, 1988. " The Value of Changes in Life Expectancy," Journal of Risk and Uncertainty, Springer, vol. 1(3), pages 285-304, September.
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  5. Corso, Phaedra S & Hammitt, James K & Graham, John D, 2001. " Valuing Mortality-Risk Reduction: Using Visual Aids to Improve the Validity of Contingent Valuation," Journal of Risk and Uncertainty, Springer, vol. 23(2), pages 165-84, September. [Downloadable!] (restricted)
  6. Jin-Tan Liu & James K. Hammitt, 2003. "Effects of Disease Type and Latency on the Value of Mortality Risk," NBER Working Papers 10012, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Ubel, Peter A. & Richardson, Jeff & Baron, Jonathan, 2002. "Exploring the role of order effects in person trade-off elicitations," Health Policy, Elsevier, vol. 61(2), pages 189-199, August. [Downloadable!] (restricted)
  8. Krupnick, Alan & Cropper, Maureen & Alberini, Anna & Heintzelman, Martin & Simon, Nathalie & O'Brien, Bernie & Goeree, Ron, 2000. "Age, Health, and the Willingness to Pay for Mortality Risk Reductions: A Contingent Valuation Survey of Ontario Residents," Discussion Papers dp-00-37, Resources For the Future. [Downloadable!]
    Other versions:
  9. 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. [Downloadable!] (restricted)
  10. O'Conor, Richard M. & Blomquist, Glenn C., 1997. "Measurement of consumer-patient preferences using a hybrid contingent valuation method," Journal of Health Economics, Elsevier, vol. 16(6), pages 667-683, December. [Downloadable!] (restricted)
  11. Kip Viscusi, W. & Magat, Wesley A. & Huber, Joel, 1991. "Pricing environmental health risks: survey assessments of risk-risk and risk-dollar trade-offs for chronic bronchitis," Journal of Environmental Economics and Management, Elsevier, vol. 21(1), pages 32-51, July. [Downloadable!] (restricted)
  12. John A. List, 2001. "Do Explicit Warnings Eliminate the Hypothetical Bias in Elicitation Procedures? Evidence from Field Auctions for Sportscards," American Economic Review, American Economic Association, vol. 91(5), pages 1498-1507, December. [Downloadable!] (restricted)
  13. Raymond Y.T. Yeung & Richard D. Smith & Sarah M. McGhee, 2003. "Willingness to pay and size of health benefit: an integrated model to test for 'sensitivity to scale'," Health Economics, John Wiley & Sons, Ltd., vol. 12(9), pages 791-796. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. George Houtven & Melonie Sullivan & Chris Dockins, 2008. "Cancer premiums and latency effects: A risk tradeoff approach for valuing reductions in fatal cancer risks," Journal of Risk and Uncertainty, Springer, vol. 36(2), pages 179-199, April. [Downloadable!] (restricted)
  2. Owen, Ann L. & Videras, Julio & Wu, Stephen, 2008. "More information isn’t always better: the case of voluntary provision of environmental quality," MPRA Paper 11588, University Library of Munich, Germany. [Downloadable!]
  3. Owen, Ann L. & Videras, Julio & Wu, Stephen, 2008. "Identity and environmentalism: the influence of community characteristics," MPRA Paper 12054, University Library of Munich, Germany. [Downloadable!]
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