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On the willingness to pay to reduce risks of small losses

Abstract

While willingness to pay is a common concept to measure the benefit gained from a reduction in the probability of loss, it is still questionable how it is linked to risk aversion and risk elimination behaviors, and how it is affected by the presence of an exogenous source of risk. By focusing only on risks of small losses, this article sheds light on these three issues and provides new results on the determinants of the willingness to pay.

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Correspondence to Christophe Courbage.

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Courbage, C., Rey, B. On the willingness to pay to reduce risks of small losses. J Econ 95, 75–82 (2008). https://doi.org/10.1007/s00712-008-0016-0

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  • DOI: https://doi.org/10.1007/s00712-008-0016-0

Keywords

  • Willingness to pay
  • Small loss
  • Risk aversion
  • Background risk

JEL Classification

  • D81