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Estimating the willingness to pay and value of risk reduction for car occupants in the road environment

Author

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  • Hensher, David A.
  • Rose, John M.
  • Ortúzar, Juan de Dios
  • Rizzi, Luis I.

Abstract

In recent years there has been a re-focus on the valuation of a statistical life from the ex post or human capital method to an ex ante willingness to pay (WTP) approach. This is in part a recognition that we may have been undervaluing the cost of fatalities and injuries to society associated with crashes, but also a strong belief in the need to focus on establishing the amount, ex ante, that individuals are willing to pay to reduce the risk of exposure to circumstances that might lead to death or degree of injury on the road network. This study has developed a framework in which to identify the degree of preference heterogeneity in willingness to pay by individuals who are drivers or passengers in cars to avoid being killed or injured. A stated choice experiment approach is developed. The empirical setting is a choice of route for a particular trip that a sample of individuals periodically undertakes in Australia. The particular trip is described in enough detail to provide the respondent with a familiar market environment, providing all the relevant background information required for making a decision. Mixed logit models are estimated to obtain the marginal (dis)utilities associated with each influence on the choice amongst the attribute packages offered in the stated choice scenarios. These estimates are used to obtain the WTP distributions for fatality and injury avoidance, which are then aggregated to obtain estimates of the value of risk reduction (VRR), of which the fatality class is also known as the value of a statistical life (VSL).

Suggested Citation

  • Hensher, David A. & Rose, John M. & Ortúzar, Juan de Dios & Rizzi, Luis I., 2009. "Estimating the willingness to pay and value of risk reduction for car occupants in the road environment," Transportation Research Part A: Policy and Practice, Elsevier, vol. 43(7), pages 692-707, August.
  • Handle: RePEc:eee:transa:v:43:y:2009:i:7:p:692-707
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    References listed on IDEAS

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    5. Zsolt Sándor & Michel Wedel, 2002. "Profile Construction in Experimental Choice Designs for Mixed Logit Models," Marketing Science, INFORMS, vol. 21(4), pages 455-475, February.
    6. Orley Ashenfelter, 2006. "Measuring the Value of a Statistical Life: Problems and Prospects," Economic Journal, Royal Economic Society, vol. 116(510), pages 10-23, March.
    7. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521747387.
    8. Peter A. Diamond & Jerry A. Hausman, 1994. "Contingent Valuation: Is Some Number Better than No Number?," Journal of Economic Perspectives, American Economic Association, vol. 8(4), pages 45-64, Fall.
    9. 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.
    10. Beattie, Jane & Covey, Judith & Dolan, Paul & Hopkins, Lorraine & Jones-Lee, Michael & Loomes, Graham & Pidgeon, Nick & Robinson, Angela & Spencer, Anne, 1998. "On the Contingent Valuation of Safety and the Safety of Contingent Valuation: Part 1--Caveat Investigator," Journal of Risk and Uncertainty, Springer, vol. 17(1), pages 5-25, October.
    11. Mauricio Sillano & Juan de Dios Ortúzar, 2005. "Willingness-to-pay estimation with mixed logit models: some new evidence," Environment and Planning A, Pion Ltd, London, vol. 37(3), pages 525-550, March.
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    Cited by:

    1. Andersson, Henrik & Hole, Arne Risa & Svensson, Mikael, 2016. "Valuation of small and multiple health risks: A critical analysis of SP data applied to food and water safety," Journal of Environmental Economics and Management, Elsevier, vol. 75(C), pages 41-53.
    2. Tanara Rosângela Vieira Sousa & Sabino Da Silva Pôrto Junior & João António Pereira & Flávio Pechansky & Paulina Do Carmo Arruda Vieira Duarte & Raquel De Boni, 2011. "Disposição A Pagar Pela Redução Do Riscode Mortalidade Associada A Acidentes De Trânsito E O Valor De Uma Vidaestatística," Anais do XXXVIII Encontro Nacional de Economia [Proceedings of the 38th Brazilian Economics Meeting] 078, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    3. 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.
    4. repec:eee:ecolec:v:151:y:2018:i:c:p:82-94 is not listed on IDEAS
    5. repec:eee:transa:v:106:y:2017:i:c:p:333-349 is not listed on IDEAS
    6. Veisten, Knut & Flügel, Stefan & Rizzi, Luis I. & Ortúzar, Juan de Dios & Elvik, Rune, 2013. "Valuing casualty risk reductions from estimated baseline risk," Research in Transportation Economics, Elsevier, vol. 43(1), pages 50-61.
    7. Juan de Dios Ortúzar, 2010. "Die Schätzung externer Effekte im Verkehrswesen mithilfe von Stated-Choice-Experimenten," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 79(2), pages 39-60.
    8. Naghmeh Niroomand & Glenn P. Jenkins, 2015. "Estimating the Value of Life, Injury, and Travel Time Saved Using a Stated Preference Framework," Development Discussion Papers 2015-08, JDI Executive Programs.
    9. repec:kap:transp:v:45:y:2018:i:2:d:10.1007_s11116-016-9736-0 is not listed on IDEAS
    10. repec:eee:transa:v:105:y:2017:i:c:p:79-94 is not listed on IDEAS
    11. Bliemer, Michiel C.J. & Rose, John M., 2011. "Experimental design influences on stated choice outputs: An empirical study in air travel choice," Transportation Research Part A: Policy and Practice, Elsevier, vol. 45(1), pages 63-79, January.

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