Journal of Risk and Uncertainty

, Volume 6, Issue 1, pp 75–90 | Cite as

An empirical investigation into the effect of psychological perceptions on the willingness-to-pay to reduce risk

  • Lan Savage
Article

Abstract

A large sample of the residents of metropolitan Chicago were interviewed to investigate whether psychometric attributes by which people view hazards are related to their willingness-to-pay to reduce the hazard. One of the hazards, stomach cancer, is found to engender fear and a high willingness-to-pay. Among the other hazards, willingness-to-pay increases with the dread of the hazard but declines with degree of knowledge people have about the risk they are exposed to. When adjustment is made for perceived probability of occurrence, one can conclude that the implied valuation of life varies across hazards according to psychometric risk perceptions. This result has practical implication for policy makers when making decisions regarding spending to reduce hazards.

Key words

risk value of life psychometric characteristics 

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Copyright information

© Kluwer Academic Publishers 1993

Authors and Affiliations

  • Lan Savage
    • 1
  1. 1.Department of EconomicsNorthwestern UniversityEvanston

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