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Risk Perception and the Value of Safety
Author(s) -
McDaniels Timothy L.,
Kamlet Mark S.,
Fischer Gregory W.
Publication year - 1992
Publication title -
risk analysis
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.972
H-Index - 130
eISSN - 1539-6924
pISSN - 0272-4332
DOI - 10.1111/j.1539-6924.1992.tb00706.x
Subject(s) - tobit model , willingness to pay , contingent valuation , socioeconomic status , risk perception , econometric model , actuarial science , estimation , valuation (finance) , economics , perception , econometrics , environmental health , psychology , microeconomics , medicine , population , management , neuroscience , finance
This paper examines the relationship between perceived risk and willingness‐to‐pay (WTP)for increased safety from technological hazards in both conceptual and empirical terms. A conceptual model is developed in which a given household's WTP for risk reductions is a function of traditional socioeconomic variables (i.e., income and base level of risk)and perceived characteristics of the hazards (i.e., dread, knowledge, and exposure). Data to estimate the model are obtained through a combined contingent valuation and risk perception survey that considers 10 technological hazards, five of which are well‐defined (e.g., death rates are known and the risks are relatively common)and five are less well‐defined. Econometric results, using TOBIT estimation procedures, support the importance of both types of variables in explaining WTP across all 10 hazards. When the risks are split into two groups, the results show that WTP for well‐defined hazards is most influenced by perceived personal exposure, while WTP for less well‐defined risks is most influenced by levels of dread and severity.