Valuation of Risks to Human Health Insensitivity to Magnitude?EPA Grant Number: R825312
Title: Valuation of Risks to Human Health Insensitivity to Magnitude?
Investigators: Hammitt, James K. , Graham, John , Hanemann, Michael
Current Investigators: Hammitt, James K. , Corso, Phaedra , Graham, John
Institution: Harvard University , University of California - Berkeley
Current Institution: Harvard University
EPA Project Officer: Lee, Sonja
Project Period: October 15, 1996 through October 14, 1999
Project Amount: $377,584
RFA: Decision-Making and Valuation for Environmental Policy (1996) RFA Text | Recipients Lists
Research Category: Economics and Decision Sciences
Contingent valuation (CV) is a popular but controversial method for estimating economic values of non-market goods. By relying on stated preferences with respect to hypothetical choices, CV can be applied to a broad range of economic goods. However, there is doubt about the accuracy with which CV studies estimate economic values, in part because estimated values can appear to be inconsistent with economic theory.
One of the most significant violations of theory is the apparently inadequate sensitivity of CV-estimated willingness to pay (WTP) to the magnitude or scope of the good offered. Such violations have been found for both environmental quality and individual health risk.
The objectives of the proposed research are to: 1) determine whether (and to what extent) insensitivity to magnitude variation is a barrier to eliciting valid estimates of WTP for reduction of risks to human health; 2) develop and test tools for the CV practitioner that enhance respondent understanding of the nature and magnitude of the health risk reduction to be offered; 3) perform rigorous, external (split sample) tests of tools designed to address the problem of insensitivity to magnitude variation; and 4) offer constructive guidance to CV practitioners, based on results from the proposed research and the existing literature, on what steps can be taken in the design of CV-health studies to reduce the problem of insensitivity to magnitude variation.
The research will include development, pilot testing, administration, and analysis of two surveys, one administered by telephone, the other a mixed telephone/mail survey. In the mixed format, subjects are initially contacted by telephone. Those who agree to participate in the study provide a mailing address to which materials are sent and arrange a time for a subsequent telephone interview during which the survey is administered.
Both surveys will include elicit WTP for health-risk reductions in a variety of contexts, e.g., traffic safety, food contamination, blood transfusion. Subsamples will be presented with different quantities of risk reduction, allowing a comparison of WTP with the magnitude of the reduction. In some cases, an alternative format will be employed in which the price of the intervention is specified and the risk reduction respondents would demand for that price is elicited; for this format, the sensitivity of indifference risk to price will be evaluated.
A range of risk-communication tools will be tested in both the telephone and the mixed telephone/mail survey. These will include tools that have been used in prior CV work (e.g., risk ladders, graph paper with a number of colored squares proportional to the risk) and verbal probability analogies (e.g., minutes in a year, empty seats in a football stadium). The tools will be presented in split samples. Their efficacy will be evaluated by whether they increase the consistency between estimated WTP and predictions of economic theory, and by respondents' reported evaluation of the helpfulness of the tools in improving their understanding of the risk and other criteria.