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Willingness to Pay and Sensitivity to Time Framing: A Theoretical Analysis and an Application on Car Safety

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  • Andersson, Henrik
  • Hammitt, James
  • Lindberg, Gunnar
  • Sundström, Kristian

Abstract

Stated preference (SP) surveys attempt to obtain monetary values for non-market goods that reflect individuals’ “true” preferences. Numerous empirical studies suggest that monetary values from SP studies are sensitive to survey design and so may not reflect respondents’ true preferences. This study examines the effect of time framing on respondents’ willingness to pay (WTP) for car safety.We explore how WTP per unit risk reduction depends on the time period over which respondents pay and face reduced risk in a theoretical model and by using data from a Swedish contingent valuation survey. We find that WTP is sensitive to time framing; the theoretical model predicts that the effect is likely to be nontrivial, and empirical estimates from an annual scenario are about 70 percent higher than estimates from a monthly scenario.

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Bibliographic Info

Paper provided by Toulouse School of Economics (TSE) in its series TSE Working Papers with number 11-271.

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Date of creation: Oct 2011
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Publication status: Published in Environmental and Resource Economics, Springer Netherlands, mars 2013.
Handle: RePEc:tse:wpaper:25460

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Keywords: Car safety; Contingent valuation; Time frame; Willingness to pay;

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Cited by:
  1. Andersson, Henrik & Risa Hole, Arne & Svensson, Mikael, 2014. "Valuation of small and multiple health risks: A critical analysis of SP data applied to food and water safety," Karlstad University Working Papers in Economics 11, Department of Economics, Karlstad University.
  2. Dorte Gyrd-Hansen, 2013. "Using the Stated Preference Technique for Eliciting Valuations: The Role of the Payment Vehicle," PharmacoEconomics, Springer, vol. 31(10), pages 853-861, October.

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