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Chained Approach vs Contingent Valuation for Estimating the Value of Risk Reduction

Olofsson, Sara LU ; Gerdtham, Ulf LU orcid ; Hultkrantz, Lars and Persson, Ulf (2016) In Working Papers 2016(34).
Abstract
To decide how much resources to spend on reducing mortality risk, governmental agencies in several countries turn to the value of a statistical life (VSL). VSL has been shown to vary depending on the size of the risk reduction, which indicates that WTP does not increase near-proportional in relation to risk reduction as suggested by standard economic theory. Chained approach (CA) is a stated preference method that was designed to deal with this problem. The objective of this study was to compare CA to the more traditional approach contingent valuation (CV). Data was collected from 500 individuals in the Swedish adult general population using two web-based questionnaires, whereof one based on CA and the other on the CV method. Despite the... (More)
To decide how much resources to spend on reducing mortality risk, governmental agencies in several countries turn to the value of a statistical life (VSL). VSL has been shown to vary depending on the size of the risk reduction, which indicates that WTP does not increase near-proportional in relation to risk reduction as suggested by standard economic theory. Chained approach (CA) is a stated preference method that was designed to deal with this problem. The objective of this study was to compare CA to the more traditional approach contingent valuation (CV). Data was collected from 500 individuals in the Swedish adult general population using two web-based questionnaires, whereof one based on CA and the other on the CV method. Despite the two different ways of deriving the estimates, the methods showed similar results. The CV result showed scale insensitivity with respect to the size of the risk reduction and disease duration and resulted in more zero and protest response. The CA result did also vary depending on the procedure used, but not when chaining on individual estimates. The CA result was also found to be more sensitive to disease duration and severity. This study provides support for the validity of studies of the WTP for a risk reduction. It also shows that CA is associated with encouraging features for the valuation of non-fatal road traffic accidents, but the result does not support the use of one method over the other. (Less)
Please use this url to cite or link to this publication:
author
; ; and
organization
publishing date
type
Working paper/Preprint
publication status
published
subject
keywords
contingent valuation, chained approach, scale sensitivity, risk reduction, willingness-to-pay, D61, D80, I18, J17
in
Working Papers
volume
2016
issue
34
pages
39 pages
publisher
Department of Economics, Lund University
language
English
LU publication?
yes
id
616b036e-f49f-4889-bfd3-67f1716702fe
alternative location
http://swopec.hhs.se/lunewp/abs/lunewp2016_034.htm
date added to LUP
2016-12-28 11:07:52
date last changed
2020-12-04 11:11:29
@misc{616b036e-f49f-4889-bfd3-67f1716702fe,
  abstract     = {{To decide how much resources to spend on reducing mortality risk, governmental agencies in several countries turn to the value of a statistical life (VSL). VSL has been shown to vary depending on the size of the risk reduction, which indicates that WTP does not increase near-proportional in relation to risk reduction as suggested by standard economic theory. Chained approach (CA) is a stated preference method that was designed to deal with this problem. The objective of this study was to compare CA to the more traditional approach contingent valuation (CV). Data was collected from 500 individuals in the Swedish adult general population using two web-based questionnaires, whereof one based on CA and the other on the CV method. Despite the two different ways of deriving the estimates, the methods showed similar results. The CV result showed scale insensitivity with respect to the size of the risk reduction and disease duration and resulted in more zero and protest response. The CA result did also vary depending on the procedure used, but not when chaining on individual estimates. The CA result was also found to be more sensitive to disease duration and severity. This study provides support for the validity of studies of the WTP for a risk reduction. It also shows that CA is associated with encouraging features for the valuation of non-fatal road traffic accidents, but the result does not support the use of one method over the other.}},
  author       = {{Olofsson, Sara and Gerdtham, Ulf and Hultkrantz, Lars and Persson, Ulf}},
  keywords     = {{contingent valuation; chained approach; scale sensitivity; risk reduction; willingness-to-pay; D61; D80; I18; J17}},
  language     = {{eng}},
  month        = {{12}},
  note         = {{Working Paper}},
  number       = {{34}},
  publisher    = {{Department of Economics, Lund University}},
  series       = {{Working Papers}},
  title        = {{Chained Approach vs Contingent Valuation for Estimating the Value of Risk Reduction}},
  url          = {{http://swopec.hhs.se/lunewp/abs/lunewp2016_034.htm}},
  volume       = {{2016}},
  year         = {{2016}},
}