IDEAS home Printed from https://ideas.repec.org/a/wly/hlthec/v18y2009i2p181-202.html
   My bibliography  Save this article

Cost-benefit analysis involving addictive goods: contingent valuation to estimate willingness-to-pay for smoking cessation

Author

Listed:
  • David L. Weimer

    (University of Wisconsin-Madison, Madison, WI, USA)

  • Aidan R. Vining

    (Simon Fraser University, Vancouver, BC, Canada)

  • Randall K. Thomas

    (Harris Interactive, Rochester, NY, USA)

Abstract

The valuation of changes in consumption of addictive goods resulting from policy interventions presents a challenge for cost-benefit analysts. Consumer surplus losses from reduced consumption of addictive goods that are measured relative to market demand schedules overestimate the social cost of cessation interventions. This article seeks to show that consumer surplus losses measured using a non-addicted demand schedule provide a better assessment of social cost. Specifically, (1) it develops an addiction model that permits an estimate of the smoker's compensating variation for the elimination of addiction; (2) it employs a contingent valuation survey of current smokers to estimate their willingness-to-pay (WTP) for a treatment that would eliminate addiction; (3) it uses the estimate of WTP from the survey to calculate the fraction of consumer surplus that should be viewed as consumer value; and (4) it provides an estimate of this fraction. The exercise suggests that, as a tentative first and rough rule-of-thumb, only about 75% of the loss of the conventionally measured consumer surplus should be counted as social cost for policies that reduce the consumption of cigarettes. Additional research to estimate this important rule-of-thumb is desirable to address the various caveats relevant to this study. Copyright © 2008 John Wiley & Sons, Ltd.

Suggested Citation

  • David L. Weimer & Aidan R. Vining & Randall K. Thomas, 2009. "Cost-benefit analysis involving addictive goods: contingent valuation to estimate willingness-to-pay for smoking cessation," Health Economics, John Wiley & Sons, Ltd., vol. 18(2), pages 181-202.
  • Handle: RePEc:wly:hlthec:v:18:y:2009:i:2:p:181-202
    DOI: 10.1002/hec.1365
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1002/hec.1365
    File Function: Link to full text; subscription required
    Download Restriction: no

    References listed on IDEAS

    as
    1. Henrik Hammar & Olof Johansson-Stenman, 2004. "The value of risk-free cigarettes - do smokers underestimate the risk?," Health Economics, John Wiley & Sons, Ltd., vol. 13(1), pages 59-71.
    2. Werner, Megan, 1999. "Allowing for Zeros in Dichotomous-Choice Contingent-Valuation Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(4), pages 479-486, October.
    3. Becker, Gary S & Grossman, Michael & Murphy, Kevin M, 1994. "An Empirical Analysis of Cigarette Addiction," American Economic Review, American Economic Association, vol. 84(3), pages 396-418, June.
    4. William N. Evans & Jeanne S. Ringel & Diana Stech, 1999. "Tobacco Taxes and Public Policy to Discourage Smoking," NBER Chapters,in: Tax Policy and the Economy, Volume 13, pages 1-56 National Bureau of Economic Research, Inc.
    5. Saffer, Henry & Grossman, Michael, 1987. "Drinking Age Laws and Highway Mortality Rates: Cause and Effect," Economic Inquiry, Western Economic Association International, vol. 25(3), pages 403-417, July.
    6. Laux, Fritz L., 2000. "Addiction as a market failure: using rational addiction results to justify tobacco regulation," Journal of Health Economics, Elsevier, vol. 19(4), pages 421-437, July.
    7. Suranovic, Steven M. & Goldfarb, Robert S. & Leonard, Thomas C., 1999. "An economic theory of cigarette addiction," Journal of Health Economics, Elsevier, vol. 18(1), pages 1-29, January.
    8. Glied, Sherry, 2002. "Youth tobacco control: reconciling theory and empirical evidence," Journal of Health Economics, Elsevier, vol. 21(1), pages 117-135, January.
    9. Berrens, Robert P. & Bohara, Alok K. & Jenkins-Smith, Hank & Silva, Carol & Weimer, David L., 2003. "The Advent of Internet Surveys for Political Research: A Comparison of Telephone and Internet Samples," Political Analysis, Cambridge University Press, vol. 11(01), pages 1-22, December.
    10. Alan Diener & Bernie O'Brien & Amiram Gafni, 1998. "Health care contingent valuation studies: a review and classification of the literature," Health Economics, John Wiley & Sons, Ltd., vol. 7(4), pages 313-326.
    11. Richard O. Zerbe, 1998. "Is cost-benefit analysis legal? Three rules," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 17(3), pages 419-456.
    12. Frank A. Sloan & Jan Ostermann & Christopher Conover & Donald H. Taylor, Jr. & Gabriel Picone, 2006. "The Price of Smoking," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262693453, March.
    13. Chaloupka, Frank J. & Warner, Kenneth E., 2000. "The economics of smoking," Handbook of Health Economics,in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 29, pages 1539-1627 Elsevier.
    14. Auld, M. Christopher & Grootendorst, Paul, 2004. "An empirical analysis of milk addiction," Journal of Health Economics, Elsevier, vol. 23(6), pages 1117-1133, November.
    15. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
    16. Cameron, Trudy Ann & James, Michelle D, 1987. "Efficient Estimation Methods for "Closed-ended' Contingent Valuation Surveys," The Review of Economics and Statistics, MIT Press, vol. 69(2), pages 269-276, May.
    17. Becker, Gary S & Murphy, Kevin M, 1988. "A Theory of Rational Addiction," Journal of Political Economy, University of Chicago Press, vol. 96(4), pages 675-700, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:tpr:amjhec:v:4:y:2018:i:1:p:1-25 is not listed on IDEAS
    2. Schmitz, Andrew & Haynes, D.J. & Schmitz, Troy G. & Schmitz, Evan D., 2013. "The U.S. Tobacco Buyout: A Partial and General Equilibrium Analysis," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 45(03), August.
    3. Aidan R. Vining & David L. Weimer, 2013. "An assessment of important issues concerning the application of benefit–cost analysis to social policy," Chapters,in: Principles and Standards for Benefit–Cost Analysis, chapter 1, pages 25-62 Edward Elgar Publishing.
    4. Goebbels, Adrienne F.G. & Lakerveld, Jeroen & Ament, André J.H.A. & Bot, Sandra D.M. & Severens, Johan L., 2012. "Exploring non-health outcomes of health promotion: The perspective of participants in a lifestyle behaviour change intervention," Health Policy, Elsevier, vol. 106(2), pages 177-186.
    5. Helen G. Levy & Edward C. Norton & Jeffrey A. Smith, 2018. "Tobacco Regulation and Cost-Benefit Analysis: How Should We Value Foregone Consumer Surplus?," American Journal of Health Economics, MIT Press, vol. 4(1), pages 1-25, Winter.
    6. Scott Farrow & Judith Shinogle, 2010. "Are There Net State Social Benefits or Costs from Legalizing Slot Machine Gambling?," UMBC Economics Department Working Papers 10-128, UMBC Department of Economics.
    7. I. Aumann & M. Treskova & N. Hagemann & J.-M. Schulenburg, 2016. "Analysis of Driving Factors of Willingness to Use and Willingness to Pay for Existing Pharmacological Smoking Cessation Aids Among Young and Middle-Aged Adults in Germany," Applied Health Economics and Health Policy, Springer, vol. 14(4), pages 441-452, August.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:hlthec:v:18:y:2009:i:2:p:181-202. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum). General contact details of provider: http://www3.interscience.wiley.com/cgi-bin/jhome/5749 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.