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The Value of Private Safety versus the Value of Public Safety

Author

Listed:
  • Johannesson, Magnus

    (Department of Economics)

  • Johansson, Per-Olov

    (Department of Economics)

  • O'Conor, Richard M.

    (Department of Economics)

Abstract

In this study we report an attempt to measure the WTP of car owners for a reduction of the probability of being killed in a traffic accident. One group of respondents is offered a safety device to be installed in their car, while another group is offered a public safety program (improved road quality) which results in the same size risk reduction. In terms of the value of a statistical life, our results are very reasonable. Moreover, there is a strong positive correlation between the magnitude of the WTP for the private safety device and the risks a respondent faces in traffic. However, the WTP for the private safety device is higher than the WTP for the public safety measure. Drawing on a model developed by Jones-Lee (1991), we show that a pure altruist may, but need not, be willing to pay more for a private risk reduction than for a uniform risk reduction of the same magnitude. This is also true for a wealth-focused altruist. Still, our empirical results are surprising, and further empirical research seems warranted.

Suggested Citation

  • Johannesson, Magnus & Johansson, Per-Olov & O'Conor, Richard M., 1996. "The Value of Private Safety versus the Value of Public Safety," SSE/EFI Working Paper Series in Economics and Finance 103, Stockholm School of Economics.
    • Handle: RePEc:hhs:hastef:0103
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    Keywords

    Safety; willingness to pay; altruism; environment; traffic;
    All these keywords.

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I10 - Health, Education, and Welfare - - Health - - - General
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior

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