Does the WTA/WTP ratio diminish as the severity of a health complaint is reduced? Testing for smoothness of the underlying utility of wealth function

Susan Chilton, Michael Jones-Lee, Rebecca McDonald and Hugh Metcalf ()

Journal of Risk and Uncertainty, 2012, vol. 45, issue 1, 24 pages

Abstract: The aim of the study reported in this paper is to test the hypothesis that individual utility of wealth functions may violate the assumption of smoothness that underpins the standard analysis of the Value of Statistical Life (VSL) and safety. In order to do so we examine the way in which the Willingness to Accept/Willingness to Pay (WTA/WTP) ratio varies as the severity of a health complaint is reduced. We find that as the severity of the health effect is reduced, the WTA/WTP ratio converges across the sample and tends to a level that does not significantly exceed unity. While we acknowledge that this does not constitute conclusive evidence of smoothness, it does suggest that the case in favour of the assumption that individual utility of wealth functions tend to display a kink at the current level of wealth is less than wholly persuasive. Copyright Springer Science+Business Media New York 2012

Keywords: Willingness to accept; Willingness to pay; VSL; J17 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://hdl.handle.net/10.1007/s11166-012-9145-5 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:jrisku:v:45:y:2012:i:1:p:1-24

Ordering information: This journal article can be ordered from
http://www.springer. ... ry/journal/11166/PS2

DOI: 10.1007/s11166-012-9145-5

Access Statistics for this article

Journal of Risk and Uncertainty is currently edited by W. Kip Viscusi

More articles in Journal of Risk and Uncertainty from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().