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The Effect of Risk Presentation on Product Valuation: An Experimental Analysis

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  • Nayga, Rodolfo M., Jr.
  • Shaw, W. Douglass
  • Silva, Andres

Abstract

We examine how people might evaluate a product with novel attribute, given various kinds of risk information. Using a product with healthful benefits, we assess subjects' willingness to pay given various kinds of health risk information conveying reduced health risks, life tradeoffs, and ambiguity. Four treatments in separate non-hypothetical experimental auctions are used to elicit willingness to pay values. Results suggest that willingness to pay vary across the groups that receive differing risk information. Specifically, willingness to pay was higher for the group that was given clear risk information and questions related to life tradeoffs than for the group given ambiguous risk information. Willingness to pay was lowest for the group that was given no risk information at all.

Suggested Citation

  • Nayga, Rodolfo M., Jr. & Shaw, W. Douglass & Silva, Andres, 2006. "The Effect of Risk Presentation on Product Valuation: An Experimental Analysis," 2006 Annual meeting, July 23-26, Long Beach, CA 21429, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  • Handle: RePEc:ags:aaea06:21429
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    Keywords

    Risk and Uncertainty;

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