IDEAS home Printed from https://ideas.repec.org/a/eee/jhecon/v78y2021ics0167629621000618.html
   My bibliography  Save this article

Willingness to pay for reductions in health risks under anticipated regret

Author

Listed:
  • Zheng, Jiakun

Abstract

In this paper, we study the willingness to pay for reductions in health risks within a framework of anticipated regret. We show that ex post information provision can be a relevant factor for regret theory to account for why people are sometimes so inclined to protect themself against certain types of health risks but not others. In particular, we find that under full resolution of uncertainty disproportionate aversion to large regrets exaggerates willingness to pay estimates. The effect induced by this notion of regret aversion can be interpreted as if regret-averse people overweight risk reductions due to prevention. However, as feedback over forgone acts is missing, the regret aversion effect disappears. Finally, we show that information avoidance induced by regret aversion can significantly bias our evaluation to prefer those health programs that completely eliminate a risk, i.e., the certainty effect.

Suggested Citation

  • Zheng, Jiakun, 2021. "Willingness to pay for reductions in health risks under anticipated regret," Journal of Health Economics, Elsevier, vol. 78(C).
    • Handle: RePEc:eee:jhecon:v:78:y:2021:i:c:s0167629621000618
    DOI: 10.1016/j.jhealeco.2021.102476
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0167629621000618
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jhealeco.2021.102476?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Thomas J. Kniesner, 2019. "Behavioral economics and the value of a statistical life," Journal of Risk and Uncertainty, Springer, vol. 58(2), pages 207-217, June.
    2. Han Bleichrodt & Alessandra Cillo & Enrico Diecidue, 2010. "A Quantitative Measurement of Regret Theory," Management Science, INFORMS, vol. 56(1), pages 161-175, January.
    3. David E. Bell, 1982. "Regret in Decision Making under Uncertainty," Operations Research, INFORMS, vol. 30(5), pages 961-981, October.
    4. Henrik Andersson & Nicolas Treich, 2011. "The Value of a Statistical Life," Chapters, in: André de Palma & Robin Lindsey & Emile Quinet & Roger Vickerman (ed.), A Handbook of Transport Economics, chapter 17, Edward Elgar Publishing.
    5. Raj Chetty, 2015. "Behavioral Economics and Public Policy: A Pragmatic Perspective," American Economic Review, American Economic Association, vol. 105(5), pages 1-33, May.
    6. Amy Finkelstein & Erzo F. P. Luttmer & Matthew J. Notowidigdo, 2013. "What Good Is Wealth Without Health? The Effect Of Health On The Marginal Utility Of Consumption," Journal of the European Economic Association, European Economic Association, vol. 11, pages 221-258, January.
    7. Zeelenberg, M. & van Dijk, W.W. & van der Pligt, J. & Manstead, A.S.R. & van Empelen, P. & Reinderman, D., 1998. "Emotional reactions to the outcomes of decisions : The role of counterfactual thought in the experience of regret and disappointment," Other publications TiSEM 5968cf3c-de93-4bbf-8445-e, Tilburg University, School of Economics and Management.
    8. Viscusi, W Kip & Aldy, Joseph E, 2003. "The Value of a Statistical Life: A Critical Review of Market Estimates throughout the World," Journal of Risk and Uncertainty, Springer, vol. 27(1), pages 5-76, August.
    9. Sloan, Frank A. & Kip Viscusi, W. & Chesson, Harrell W. & Conover, Christopher J. & Whetten-Goldstein, Kathryn, 1998. "Alternative approaches to valuing intangible health losses: the evidence for multiple sclerosis1," Journal of Health Economics, Elsevier, vol. 17(4), pages 475-497, August.
    10. Rachel Croson & Nicolas Treich, 2014. "Behavioral Environmental Economics: Promises and Challenges," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 58(3), pages 335-351, July.
    11. David E. Bell, 1983. "Risk Premiums for Decision Regret," Management Science, INFORMS, vol. 29(10), pages 1156-1166, October.
    12. Patt, Anthony & Zeckhauser, Richard, 2000. "Action Bias and Environmental Decisions," Journal of Risk and Uncertainty, Springer, vol. 21(1), pages 45-72, July.
    13. Milton C. Weinstein & Donald S. Shepard & Joseph S. Pliskin, 1980. "The Economic Value of Changing Mortality Probabilities: A Decision-Theoretic Approach," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 94(2), pages 373-396.
    14. Smith, Richard David, 1996. "Is Regret Theory an alternative basis for estimating the value of healthcare interventions?," Health Policy, Elsevier, vol. 37(2), pages 105-115, August.
    15. Viscusi, W Kip, 1993. "The Value of Risks to Life and Health," Journal of Economic Literature, American Economic Association, vol. 31(4), pages 1912-1946, December.
    16. Evans, William N & Viscusi, W Kip, 1991. "Estimation of State-Dependent Utility Functions Using Survey Data," The Review of Economics and Statistics, MIT Press, vol. 73(1), pages 94-104, February.
    17. Carthy, Trevor & Chilton, Susan & Covey, Judith & Hopkins, Lorraine & Jones-Lee, Michael & Loomes, Graham & Pidgeon, Nick & Spencer, Anne, 1998. "On the Contingent Valuation of Safety and the Safety of Contingent Valuation: Part 2--The CV/SG "Chained" Approach," Journal of Risk and Uncertainty, Springer, vol. 17(3), pages 187-213, December.
    18. Loomes, Graham & Starmer, Chris & Sugden, Robert, 1991. "Observing Violations of Transitivity by Experimental Methods," Econometrica, Econometric Society, vol. 59(2), pages 425-439, March.
    19. Larrick, Richard P. & Boles, Terry L., 1995. "Avoiding Regret in Decisions with Feedback: A Negotiation Example," Organizational Behavior and Human Decision Processes, Elsevier, vol. 63(1), pages 87-97, July.
    20. Quiggin, John, 1994. "Regret Theory with General Choice Sets," Journal of Risk and Uncertainty, Springer, vol. 8(2), pages 153-165, March.
    21. Edwards, Ryan D, 2008. "Health Risk and Portfolio Choice," Journal of Business & Economic Statistics, American Statistical Association, vol. 26, pages 472-485.
    22. W. Kip Viscusi, 2019. "Utility functions for mild and severe health risks," Journal of Risk and Uncertainty, Springer, vol. 58(2), pages 143-166, June.
    23. Han Bleichrodt & Louis Eeckhoudt, 2006. "Willingness to pay for reductions in health risks when probabilities are distorted," Health Economics, John Wiley & Sons, Ltd., vol. 15(2), pages 211-214, February.
    24. Loomes, Graham & Sugden, Robert, 1982. "Regret Theory: An Alternative Theory of Rational Choice under Uncertainty," Economic Journal, Royal Economic Society, vol. 92(368), pages 805-824, December.
    25. Boeri, Marco & Longo, Alberto & Grisolía, José M. & Hutchinson, W. George & Kee, Frank, 2013. "The role of regret minimisation in lifestyle choices affecting the risk of coronary heart disease," Journal of Health Economics, Elsevier, vol. 32(1), pages 253-260.
    26. Zeelenberg, M. & van Dijk, W.W. & Manstead, A.S.R., 1998. "The experience of regret and disappointment," Other publications TiSEM 57c0c58e-e9a1-49f0-a024-d, Tilburg University, School of Economics and Management.
    27. Caballe, Jordi & Pomansky, Alexey, 1996. "Mixed Risk Aversion," Journal of Economic Theory, Elsevier, vol. 71(2), pages 485-513, November.
    28. Grether, David M & Plott, Charles R, 1979. "Economic Theory of Choice and the Preference Reversal Phenomenon," American Economic Review, American Economic Association, vol. 69(4), pages 623-638, September.
    29. Zeelenberg, M., 1999. "Anticipated regret, expected feedback and behavioral decision-making," Other publications TiSEM 38371d1b-31fd-45b0-860f-b, Tilburg University, School of Economics and Management.
    30. Zeelenberg, M. & van Dijk, W.W. & van der Pligt, J. & Manstead, A.S.R. & van Empelen, P. & Reinderman, D., 1998. "Emotional reactions to the outcomes of decision : The role of counterfactual thought in the experience of regret," Other publications TiSEM eafc28f9-18d6-4b76-b70f-3, Tilburg University, School of Economics and Management.
    31. repec:reg:rpubli:282 is not listed on IDEAS
    32. Peter Wakker & Daniel Deneffe, 1996. "Eliciting von Neumann-Morgenstern Utilities When Probabilities Are Distorted or Unknown," Management Science, INFORMS, vol. 42(8), pages 1131-1150, August.
    33. Humphrey, Steven J., 2004. "Feedback-conditional regret theory and testing regret-aversion in risky choice," Journal of Economic Psychology, Elsevier, vol. 25(6), pages 839-857, December.
    34. Michenaud, Sébastien & Solnik, Bruno, 2008. "Applying regret theory to investment choices: Currency hedging decisions," Journal of International Money and Finance, Elsevier, vol. 27(5), pages 677-694, September.
    35. Diecidue, Enrico & Somasundaram, Jeeva, 2017. "Regret theory: A new foundation," Journal of Economic Theory, Elsevier, vol. 172(C), pages 88-119.
    36. Shefrin, Hersh & Statman, Meir, 1985. "The Disposition to Sell Winners Too Early and Ride Losers Too Long: Theory and Evidence," Journal of Finance, American Finance Association, vol. 40(3), pages 777-790, July.
    37. Viscusi, W Kip & Evans, William N, 1990. "Utility Functions That Depend on Health Status: Estimates and Economic Implications," American Economic Review, American Economic Association, vol. 80(3), pages 353-374, June.
    38. François Salanié & Nicolas Treich, 2009. "Regulation in Happyville," Economic Journal, Royal Economic Society, vol. 119(537), pages 665-679, April.
    39. Zeelenberg, Marcel & van Dijk, Wilco W. & van der Pligt, Joop & Manstead, Antony S. R. & van Empelen, Pepijn & Reinderman, Dimitri, 1998. "Emotional Reactions to the Outcomes of Decisions: The Role of Counterfactual Thought in the Experience of Regret and Disappointment," Organizational Behavior and Human Decision Processes, Elsevier, vol. 75(2), pages 117-141, August.
    40. Rachel J Huang & Alexander Muermann & Larry Y Tzeng, 2014. "Regret and Regulation," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 39(1), pages 65-89, March.
    41. Zeelenberg, M. & van Dijk, W.W. & van der Pligt, J. & Manstead, A.S.R. & van Empelen, P. & Reinderman, D., 1998. "Emotional reactions to the outcomes of decisions : The role of counterfactual thought in the experience of regret and disappointment," Discussion Paper 1998-35, Tilburg University, Center for Economic Research.
    42. Hanemann, W Michael, 1991. "Willingness to Pay and Willingness to Accept: How Much Can They Differ?," American Economic Review, American Economic Association, vol. 81(3), pages 635-647, June.
    43. Han Bleichrodt & Peter P. Wakker, 2015. "Regret Theory: A Bold Alternative to the Alternatives," Economic Journal, Royal Economic Society, vol. 0(583), pages 493-532, March.
    44. Emel Filiz-Ozbay & Erkut Y. Ozbay, 2007. "Auctions with Anticipated Regret: Theory and Experiment," American Economic Review, American Economic Association, vol. 97(4), pages 1407-1418, September.
    45. Ehrlich, Isaac & Becker, Gary S, 1972. "Market Insurance, Self-Insurance, and Self-Protection," Journal of Political Economy, University of Chicago Press, vol. 80(4), pages 623-648, July-Aug..
    46. Chris Starmer, 2000. "Developments in Non-expected Utility Theory: The Hunt for a Descriptive Theory of Choice under Risk," Journal of Economic Literature, American Economic Association, vol. 38(2), pages 332-382, June.
    47. Ian J. Bateman & Richard T. Carson & Brett Day & Michael Hanemann & Nick Hanley & Tannis Hett & Michael Jones-Lee & Graham Loomes, 2002. "Economic Valuation with Stated Preference Techniques," Books, Edward Elgar Publishing, number 2639.
    48. Michael Braun & Alexander Muermann, 2004. "The Impact of Regret on the Demand for Insurance," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 71(4), pages 737-767, December.
    49. Beattie, Jane & Covey, Judith & Dolan, Paul & Hopkins, Lorraine & Jones-Lee, Michael & Loomes, Graham & Pidgeon, Nick & Robinson, Angela & Spencer, Anne, 1998. "On the Contingent Valuation of Safety and the Safety of Contingent Valuation: Part 1--Caveat Investigator," Journal of Risk and Uncertainty, Springer, vol. 17(1), pages 5-25, October.
    50. Russell Golman & David Hagmann & George Loewenstein, 2017. "Information Avoidance," Journal of Economic Literature, American Economic Association, vol. 55(1), pages 96-135, March.
    51. Pratt, John W & Zeckhauser, Richard J, 1996. "Willingness to Pay and the Distribution of Risk and Wealth," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 747-763, August.
    52. Jeeva Somasundaram & Enrico Diecidue, 2017. "Regret theory and risk attitudes," Journal of Risk and Uncertainty, Springer, vol. 55(2), pages 147-175, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Andersson, Henrik & Scholtz, Henrik & Zheng, Jiakun, 2023. "Measuring regret theory in the health and financial domain," TSE Working Papers 23-1449, Toulouse School of Economics (TSE).
    2. Yushi Wang & Licheng Sun & Shilong Li, 2022. "Production Decisions of Automakers Considering the Impact of Anticipated Regret under the Dual-Credit Policy," Sustainability, MDPI, vol. 14(11), pages 1-18, May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jiakun Zheng, 2021. "Willingness to pay for reductions in health risks under anticipated regret," Post-Print hal-04227414, HAL.
    2. Diecidue, Enrico & Somasundaram, Jeeva, 2017. "Regret theory: A new foundation," Journal of Economic Theory, Elsevier, vol. 172(C), pages 88-119.
    3. Qin, Jie, 2015. "A model of regret, investor behavior, and market turbulence," Journal of Economic Theory, Elsevier, vol. 160(C), pages 150-174.
    4. Korn, Olaf & Rieger, Marc Oliver, 2019. "Hedging with regret," Journal of Behavioral and Experimental Finance, Elsevier, vol. 22(C), pages 192-205.
    5. Emmanuelle GABILLON, 2020. "When choosing is painful: anticipated regret and psychological opportunity cost," Bordeaux Economics Working Papers 2020-04, Bordeaux School of Economics (BSE).
    6. Gabillon, Emmanuelle, 2020. "When choosing is painful: Anticipated regret and psychological opportunity cost," Journal of Economic Behavior & Organization, Elsevier, vol. 178(C), pages 644-659.
    7. Koehler, Jonathan J. & Gershoff, Andrew D., 2003. "Betrayal aversion: When agents of protection become agents of harm," Organizational Behavior and Human Decision Processes, Elsevier, vol. 90(2), pages 244-261, March.
    8. Zhuzhu Zhou, 2024. "Ranking blame," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 78(2), pages 403-441, September.
    9. Christian Gollier, 2020. "Aversion to risk of regret and preference for positively skewed risks," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 70(4), pages 913-941, November.
    10. Jeeva Somasundaram & Enrico Diecidue, 2017. "Regret theory and risk attitudes," Journal of Risk and Uncertainty, Springer, vol. 55(2), pages 147-175, December.
    11. Andersson, Henrik & Scholtz, Henrik & Zheng, Jiakun, 2023. "Measuring regret theory in the health and financial domain," TSE Working Papers 23-1449, Toulouse School of Economics (TSE).
    12. Henrik Andersson & Nicolas Treich, 2011. "The Value of a Statistical Life," Chapters, in: André de Palma & Robin Lindsey & Emile Quinet & Roger Vickerman (ed.), A Handbook of Transport Economics, chapter 17, Edward Elgar Publishing.
    13. Chi, Yichun & Zhuang, Sheng Chao, 2022. "Regret-based optimal insurance design," Insurance: Mathematics and Economics, Elsevier, vol. 102(C), pages 22-41.
    14. Han Bleichrodt & Peter P. Wakker, 2015. "Regret Theory: A Bold Alternative to the Alternatives," Economic Journal, Royal Economic Society, vol. 0(583), pages 493-532, March.
    15. Han Bleichrodt & Alessandra Cillo & Enrico Diecidue, 2010. "A Quantitative Measurement of Regret Theory," Management Science, INFORMS, vol. 56(1), pages 161-175, January.
    16. Herweg, Fabian & Müller, Daniel, 2021. "A comparison of regret theory and salience theory for decisions under risk," Journal of Economic Theory, Elsevier, vol. 193(C).
    17. Pieters, R. & Zeelenberg, M., 1999. "Wasting a window of opportunity : Anticipated and experienced regret in intention-behavior consistency," Discussion Paper 1999-03, Tilburg University, Center for Economic Research.
    18. Rachel J. Huang & Alexander Muermann & Larry Y. Tzeng, 2016. "Hidden Regret In Insurance Markets," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 83(1), pages 181-216, January.
    19. Enrico Diecidue & Nils Rudi & Wenjie Tang, 2012. "Dynamic Purchase Decisions Under Regret: Price and Availability," Decision Analysis, INFORMS, vol. 9(1), pages 22-30, March.
    20. Zeelenberg, Marcel & van Dijk, Wilco W. & Manstead, Antony S. R., 2000. "Regret and Responsibility Resolved? Evaluating Ordonez and Connolly's (2000) Conclusions," Organizational Behavior and Human Decision Processes, Elsevier, vol. 81(1), pages 143-154, January.

    More about this item

    Keywords

    Regret aversion; Willingness to pay; Probability weighting; Health policy; Cost-benefit analysis; Information avoidance;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jhecon:v:78:y:2021:i:c:s0167629621000618. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505560 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.