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

Author

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  • Han Bleichrodt

    (Erasmus University, Rotterdam, The Netherlands)

  • 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.

Suggested Citation

  • 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.
  • Handle: RePEc:wly:hlthec:v:15:y:2006:i:2:p:211-214
    DOI: 10.1002/hec.1073
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    References listed on IDEAS

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    Cited by:

    1. Mehmet Kutluay & Roy Brouwer & Richard S. J. Tol, 2017. "Preference updating in public health risk valuation," Working Paper Series 1517, Department of Economics, University of Sussex.
    2. Henrik Andersson, 2008. "Willingness to Pay for Car Safety: Evidence from Sweden," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 41(4), pages 579-594, December.
    3. Rheinberger, Christoph M. & Herrera-Araujo, Daniel & Hammitt, James K., 2016. "The value of disease prevention vs treatment," Journal of Health Economics, Elsevier, vol. 50(C), pages 247-255.
    4. Henrik Andersson & Nicolas Treich, 2011. "The Value of a Statistical Life," Chapters,in: A Handbook of Transport Economics, chapter 17 Edward Elgar Publishing.
    5. Christian Gollier & James Hammitt & Nicolas Treich, 2013. "Risk and choice: A research saga," Journal of Risk and Uncertainty, Springer, vol. 47(2), pages 129-145, October.
    6. Andersson, Henrik, 2008. "Perception of Own Death Risk: A Reassessment of Road-Traffic Mortality Risk," Working Papers 2008:11, Swedish National Road & Transport Research Institute (VTI).
    7. Hammitt, James K. & Herrera-Araujo, Daniel & Rheinberger, Christoph, 2016. "The Value of Cancer Prevention vs Treatment," TSE Working Papers 16-628, Toulouse School of Economics (TSE).
    8. Treich, Nicolas, 2010. "The value of a statistical life under ambiguity aversion," Journal of Environmental Economics and Management, Elsevier, vol. 59(1), pages 15-26, January.
    9. Jacoline Bouvy & Just Weemers & Huub Schellekens & Marc Koopmanschap, 2011. "Willingness to Pay for Adverse Drug Event Regulatory Actions," PharmacoEconomics, Springer, vol. 29(11), pages 963-975, November.
    10. James K. Hammitt, 2013. "Positive versus Normative Justifications for Benefit-Cost Analysis: Implications for Interpretation and Policy," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 7(2), pages 199-218, July.
    11. Dorte Gyrd-Hansen & Peder Andreas Halvorsen & Ivar Sønbø Kristiansen, 2008. "Willingness-to-pay for a statistical life in the times of a pandemic," Health Economics, John Wiley & Sons, Ltd., vol. 17(1), pages 55-66.
    12. Courbage, Christophe & Rey, Béatrice & Treich, Nicolas, 2013. "Prevention and precaution," TSE Working Papers 13-445, Toulouse School of Economics (TSE).
    13. Ana Bobinac & Job Exel & Frans Rutten & Werner Brouwer, 2014. "The Value of a QALY: Individual Willingness to Pay for Health Gains Under Risk," PharmacoEconomics, Springer, vol. 32(1), pages 75-86, January.

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