Determining Consumer Willingness to Pay, Risk Behavior and Preferences

Abstract

Background: During the 1990s, there was a rapid increase in sales of Natural Health Products (NHPs) on the Canadian market. In 1997, the Canadian government put forth a proposal for increased regulation of NHPs. The new regulations were intended to address a number of consumer issues: a lack of adequate product information and poor product quality. This regulatory climate provided a unique opportunity to ascribe monetary values to the new regulations using contingent valuation willingness-to-pay (WTP) methods.

Objectives: To determine: (i) if NHP consumers use these products together with or instead of conventional medications; (ii) consumers’ WTP for increased regulation of NHPs; and (iii) consumers’ responsiveness to risk and how it affects their choice of treatment.

Methods: Investigators used a subject-administered interactive computer survey to query a convenience sample of 306 Canadian consumers. Three hypothetical symptom/disease scenarios (cough and cold, arthritis, high blood pressure) with NHP treatment choices of increasing risk of harm were posed. Information on consumers’ WTP, regulatory preferences, and responses to increasing gradients of treatment risk were collected. For each scenario respondents chose one of three labels (proxies for regulation preference), ranked the importance of regulatory (safety, product quality) and nonregulatory (cost) NHP attributes and indicated their WTP for these attributes.

Results: The survey respondents were most commonly white and female (58.8%), between 35–40 years old (36.6%), married (55.2%), better educated, i.e. with some college education (29.7%), with a household income above 60 000 Canadian dollars (28.4%) and in good health (36.9%). The most likely NHP purchase site was a pharmacy (55.6%). Complementing or substituting for conventional medication was dependent on the scenario; as the risk profile of the scenario increased, the majority of respondents changed their treatment to more conventional therapy. ‘Substituters’ decreased from 23.5% in the first (least risky) scenario to 11.1 % in the last, most risky scenario. WTP for increased regulation was 90% over the NHP’s base price. Consumers were most willing to pay for information on quality, followed by side effects, drug interactions and efficacy; the majority (75%) chose the label that provided the most information.

Conclusions: Respondents demonstrated risk aversion to the purchasing of NHPs by choosing conventional medicines over NHPs as the risk of harm increased by scenario and choice of treatment. Most respondents were willing to pay almost double the current NHP base price for the increased safety and information promised by the new regulations (demonstrated in this project by more informative NHP product labels).