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Baseline risk and marginal willingness to pay for health risk reduction

Shelby Gerking (), Wiktor Adamowicz (), Mark Dickie and Marcella Veronesi ()
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Shelby Gerking: Tilburg University
Mark Dickie: University of Central Florida

Journal of Risk and Uncertainty, 2017, vol. 55, issue 2, No 4, 177-202

Abstract: Abstract Empirical results presented in this paper suggest that parents’ marginal willingness to pay (MWTP) for a reduction in morbidity risk from heart disease is inversely related to baseline risk (i.e., the amount of risk initially faced) both for themselves and for their children. For instance, a 40% reduction from the mean of baseline risk results in an increase in MWTP by 70% or more. Thus, estimates of monetary benefits of public programs to reduce heart disease risk would be understated if the standard practice is followed of evaluating MWTP at initial risk levels and then multiplying this value by the number of cases avoided. Estimates are supported by: (1) unique quantitative information on perceptions of the risk of getting heart disease that allow baseline risk to be defined at an individual level and (2) improved econometric procedures to control for well-known difficulties associated with stated preference data.

Keywords: Baseline risk; Morbidity; Willingness to pay; Heart disease; Health risk; Endogenous risk; Children’s morbidity risk (search for similar items in EconPapers)
JEL-codes: D61 I12 I38 J13 Q51 Q58 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1007/s11166-017-9267-x

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