An Investigation of the Rationality of Consumer Valuations of Multiple Health Risks
Viscusi, W. Kip
Magat, Wesley A.
Huber, Joel
:
2012
Abstract
After developing a conceptual analysis of consumer valuation of multiple risks, we explore
both economic and cognitive hypotheses regarding individual risk-taking. Using a sample
of over 1,500 consumers, our study ascertains risk-dollar tradeoffs for the risks associated
with using an insecticide and a toilet bowl cleaner. We observe the expected positive valuation of risk reductions andfind empirical supportfor a diminishing in the valuation of risk reduction as the extent of the risk reduction increases. We also find evidence of certainty premiums for the total elimination of one risk, but no strong evidence of additional certainty premiums for the elimination of multiple risks. Strong reference risk effects are evident, as increases in risk were valued much more greatly than were decreases.
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