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The value of a Statistical Life under Ambiguity Aversion

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  • TREICH Nicolas

The paper shows that ambiguity aversion increases the value of a statistical life if the marginal utility of an increase in wealth is larger if one is alive rather than dead. Intuitively, ambiguity aversion has a similar effect as an increase in the perceived baseline mortality risk, and thus operates as the "dead anyway" effect. A numerical example suggests, however, that ambiguity aversion cannot justify the substantial "ambiguity premium" apparently embodied in environmental policy-making. The paper also shows that ambiguity aversion decreases the marginal cost of individual self-protection effort but may well decrease its marginal benefit, so that the total effect of ambiguity aversion on self-protection is unclear.

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File URL: http://www2.toulouse.inra.fr/lerna/travaux/cahiers2008/08.05.249.pdf
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Paper provided by LERNA, University of Toulouse in its series LERNA Working Papers with number 08.05.249.

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Date of creation: Jan 2008
Handle: RePEc:ler:wpaper:08.05.249
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