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Baseline Risk and Preference for Reductions in Risk‐to‐Life

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  • John K. Horowitz
  • Richard T. Carson

Abstract

The typical model of individual attitudes toward risk‐to‐life suggests that an individual's willingness to pay for a reduction in mortality risk increases with the baseline risk. The higher‐baseline hypothesis has been the subject of several empirical tests but results have so far been mixed. Using survey evidence, we present a situation in which subjects do prefer to reduce risks for which the baseline is higher. This finding is robust to several alternative explanations. Survey responses reflect subjects’concerns about government effectiveness in risk reduction, environmental effects associated with the various hazards, and other idiosyncratic elements of the risks; however, these concerns appear to occur in addition to, not in lieu of, the preference to reduce higher risks.

Suggested Citation

  • John K. Horowitz & Richard T. Carson, 1993. "Baseline Risk and Preference for Reductions in Risk‐to‐Life," Risk Analysis, John Wiley & Sons, vol. 13(4), pages 457-462, August.
    • Handle: RePEc:wly:riskan:v:13:y:1993:i:4:p:457-462
    DOI: 10.1111/j.1539-6924.1993.tb00746.x
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    1. Kopp, Raymond J. & Krupnick, Alan J. & Toman, Michael, 1997. "Cost-Benefit Analysis and Regulatory Reform: An Assessment of the Science and the Art," Discussion Papers 10851, Resources for the Future.
    2. George L. Van Houtven, 1997. "Altruistic Preferences for Life‐Saving Public Programs: Do Baseline Risks Matter?," Risk Analysis, John Wiley & Sons, vol. 17(1), pages 85-92, February.

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