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.
Similar content being viewed by others
References
Fischhoff, Baruch, Paul Slovic, Sarah Lichtenstein, Stephen Read, and Barbara Combs. (1978). “How Safe is Safe Enough? A Psychometric Study of Attitudes Towards Technological Risks and Benefits,”Policy Sciences 9, 127–152.
Graham, John D. (1982). “Some Explanations for Disparities in Lifesaving Investments,”Policy Studies Review 1, 692–704.
Johnson, Eric J. and Amos Tversky. (1984). “Representation of Perceptions of Risks,”Journal of Experimental Psychology: General 113, 55–70.
Jones-Lee, Michael. (1989).The Economics of Safety and Physical Risk. New York: Basil Blackwell.
Jones-Lee, Michael, Max Hammerton, and Peter Philips. (1985). “The Value of Safety: Results of a National Sample Survey,”Economic Journal 95, 49–72.
McDaniels, Timothy. (1988). “Comparing Expressed and Revealed Preferences for Risk Reduction: Different Hazards and Question Frames,”Risk Analysis 8, 593–604.
Mooney, Gavin. (1977).The Valuation of Human Life. London: MacMillan.
National Center for Health Statistics (annual).Vital Statistics of the United States. Washington, DC: U.S. Government Printing Office.
Savage, Ian. (1991). “Psychological Features Affecting Valuation of Life,”Economics Letters 35, 379–383.
Slovic, Paul, Baruch Fischhoff, and Sarah Lichtenstein. (1990). “Facts and Fears: Understanding Perceived Risk.” In Richard Schwing and Walter A. Albers (eds.),Societal Risk Assessment: How Safe is Safe Enough? New York: Plenum.
Slovic, Paul, Baruch Fischhoff, and Sarah Lichtenstein. (1985). “Characterizing Perceived Risk.” In Robert W. Kates, Christoph Hohenemser, and Jeanne X. Kasperson (eds.),Perilous Progress: Managing the Hazards of Technology. Boulder, CO: Westview.
Viscusi, W. Kip. (1992).Fatal Tradeoffs: Public and Private Responsibilities for Risk. New York: Oxford University Press.
Author information
Authors and Affiliations
Additional information
I would like to thank the Institute for Modern Communications at Northwestern University for funding the survey work, and the Federal Aviation Administration for funding my research assistant, Sangeeta Kasturia, as part of the Center for Aviation Systems Reliability. I would also like to thank Paul Slovic and Tim McDaniels for helpful discussions, and the editor for invaluable advise on exposition.
Rights and permissions
About this article
Cite this article
Savage, L. An empirical investigation into the effect of psychological perceptions on the willingness-to-pay to reduce risk. J Risk Uncertainty 6, 75–90 (1993). https://doi.org/10.1007/BF01065351
Issue Date:
DOI: https://doi.org/10.1007/BF01065351