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Willingness to pay for reductions in health risks when probabilities are distorted

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  • Han Bleichrodt
  • Louis Eeckhoudt

Abstract

We study the willingness to pay for reductions in health risks when people do not evaluate probabilities linearly, as is commonly assumed in elicitations of willingness to pay, but weight probabilities, as is commonly observed in empirical studies of decision under risk. We show that for the levels of baseline risk typically considered, probability weighting strongly affects willingness to pay estimates and may lead to unstable monetary valuations of health. Copyright © 2005 John Wiley & Sons, Ltd.

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  • Han Bleichrodt & Louis Eeckhoudt, 2006. "Willingness to pay for reductions in health risks when probabilities are distorted," Health Economics, John Wiley & Sons, Ltd., vol. 15(2), pages 211-214, February.
    • Handle: RePEc:wly:hlthec:v:15:y:2006:i:2:p:211-214
    DOI: 10.1002/hec.1073
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