Document Type
Article
Publication Title
The RAND Journal of Economics
Publication Date
2012
ISSN
0741-6261
Page Number
465
Keywords
certainty premiums, consumer valuation, risk-dollar tradeoffs, product safety
Disciplines
Consumer Protection Law | Health Law and Policy | Law
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.
Recommended Citation
W. Kip Viscusi, Wesley A. Magat, and Joel Huber,
An Investigation of the Rationality of Consumer Valuations of Multiple Health Risks, 18 The RAND Journal of Economics. 465
(2012)
Available at: https://scholarship.law.vanderbilt.edu/faculty-publications/54