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An Empirical Model of Demand for Future Health States when Valuing Risk-Mitigating Programs

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  • Trudy Ann Cameron

    () (Department of Economics, University of Oregon)

  • J.R. DeShazo

    (School of Public Policy, UCLA)

Abstract

We develop a structural option price model in which individuals choose among competing risk-mitigating programs to alter their probability of experiencing future years in various degraded health states. The novel aspects of this model include separate estimates of the marginal utilities of avoiding years of morbidity and lost life-years. With these marginal utilities, we may evaluate a broad spectrum of probabilistic health outcomes over any period of an individualÂ’s future life. The model also reduces potential biases associated with singleperiod, single-risk models typically used to produce estimates of the Value of a Statistical Life (VSL) by allowing individuals to substitute risk mitigation across competing sources of risk and across future years of their lives. We evaluate this model using data from a national survey that contains a choice experiment on demand for the mitigation of illness-specific risks.

Suggested Citation

  • Trudy Ann Cameron & J.R. DeShazo, 2004. "An Empirical Model of Demand for Future Health States when Valuing Risk-Mitigating Programs," University of Oregon Economics Department Working Papers 2004-11, University of Oregon Economics Department, revised 01 Apr 2004.
  • Handle: RePEc:ore:uoecwp:2004-11
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    Keywords

    Value of a Statistical Life (VSL); mortality risk; morbidity risk; health; option price;

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