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Estimation of State-Dependent Utility Functions Using Survey Data

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  • Evans, William N
  • Viscusi, W Kip

Abstract

Surveys of individual's risk-dollar trade-offs illuminate not only the local trade-off rates, but also can be used to address more fundamental questions about the structure of utility functions. This largely unexplored empirical area is investigated by developing an econometric technique to estimate utility functions based on survey data on risk-dollar trade-offs for minor health effects. The empirical tests indicate that for all but one of the temporary health effects considered, consumers treat injuries as tantamount to a drop in income, implying that the health impact does not alter the structure of the utility function in a fundamental way. Copyright 1991 by MIT Press.

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  • Evans, William N & Viscusi, W Kip, 1991. "Estimation of State-Dependent Utility Functions Using Survey Data," The Review of Economics and Statistics, MIT Press, vol. 73(1), pages 94-104, February.
  • Handle: RePEc:tpr:restat:v:73:y:1991:i:1:p:94-104
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    1. Ann Fisher & Lauraine G. Chestnut & Daniel M. Violette, 1989. "The value of reducing risks of death: A note on new evidence," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 8(1), pages 88-100.
    2. W. Kip Viscusi & Wesley A. Magat & Joel Huber, 1987. "An Investigation of the Rationality of Consumer Valuations of Multiple Health Risks," RAND Journal of Economics, The RAND Corporation, vol. 18(4), pages 465-479, Winter.
    3. Philip J. Cook & Daniel A. Graham, 1977. "The Demand for Insurance and Protection: The Case of Irreplaceable Commodities," The Quarterly Journal of Economics, Oxford University Press, vol. 91(1), pages 143-156.
    4. Viscusi, W Kip & Evans, William N, 1990. "Utility Functions That Depend on Health Status: Estimates and Economic Implications," American Economic Review, American Economic Association, vol. 80(3), pages 353-374, June.
    5. Smith, V Kerry & Desvousges, William H, 1986. "The Value of Avoiding a Lulu: Hazardous Waste Disposal Sites," The Review of Economics and Statistics, MIT Press, vol. 68(2), pages 293-299, May.
    6. Gerking, Shelby & de Haan, Menno & Schulze, William, 1988. "The Marginal Value of Job Safety: A Contingent Valuation Study," Journal of Risk and Uncertainty, Springer, vol. 1(2), pages 185-199, June.
    7. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
    8. Biddle, Jeff E & Zarkin, Gary A, 1988. "Worker Preferences and Market Compensation for Job Risk," The Review of Economics and Statistics, MIT Press, vol. 70(4), pages 660-667, November.
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