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

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Listed:
  • H. Bleichrodt
  • L. Eeckhoudt

    (LEM - Lille - Economie et Management - Université de Lille, Sciences et Technologies - CNRS - Centre National de la Recherche Scientifique)

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.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • H. Bleichrodt & L. Eeckhoudt, 2005. "Willingness to pay for reductions in health risks when probabilities are distorted," Post-Print hal-00199641, HAL.
    • Handle: RePEc:hal:journl:hal-00199641
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    References listed on IDEAS

    as
    1. Jones-Lee, Michael W, 1974. "The Value of Changes in the Probability of Death or Injury," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 835-849, July/Aug..
    2. Sloan, Frank A. & Kip Viscusi, W. & Chesson, Harrell W. & Conover, Christopher J. & Whetten-Goldstein, Kathryn, 1998. "Alternative approaches to valuing intangible health losses: the evidence for multiple sclerosis1," Journal of Health Economics, Elsevier, vol. 17(4), pages 475-497, August.
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    7. Han Bleichrodt & Jose Luis Pinto, 2000. "A Parameter-Free Elicitation of the Probability Weighting Function in Medical Decision Analysis," Management Science, INFORMS, vol. 46(11), pages 1485-1496, November.
    8. Quiggin, John & Horowitz, John, 1995. "Time and Risk," Journal of Risk and Uncertainty, Springer, vol. 10(1), pages 37-55, January.
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