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The Value of Private Safety versus the Value of Public Safety

Listed author(s):
  • Johannesson, Magnus


    (Department of Economics)

  • Johansson, Per-Olov


    (Department of Economics)

  • O'Conor, Richard M.

    (Department of Economics)

In this study we report an attempt to measure the WTP of car owners for a reduction of the probability of being killed in a traffic accident. One group of respondents is offered a safety device to be installed in their car, while another group is offered a public safety program (improved road quality) which results in the same size risk reduction. In terms of the value of a statistical life, our results are very reasonable. Moreover, there is a strong positive correlation between the magnitude of the WTP for the private safety device and the risks a respondent faces in traffic. However, the WTP for the private safety device is higher than the WTP for the public safety measure. Drawing on a model developed by Jones-Lee (1991), we show that a pure altruist may, but need not, be willing to pay more for a private risk reduction than for a uniform risk reduction of the same magnitude. This is also true for a wealth-focused altruist. Still, our empirical results are surprising, and further empirical research seems warranted.

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Paper provided by Stockholm School of Economics in its series SSE/EFI Working Paper Series in Economics and Finance with number 103.

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Length: 18 pages
Date of creation: Feb 1996
Publication status: Published in Journal of Risk and Uncertainty, 1996, pages 263-275.
Handle: RePEc:hhs:hastef:0103
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