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The Compensating Variation Approach: The Case of Lives Saved vs Lives Taken

Author

Listed:
  • Amiram Gafni

    (Centre for Health Economics and Policy Analysis, McMaster University)

  • Abraham Ravid

    (Graduate School of Management, University of California)

Abstract

In recent years many empirical studies have reported substantial differences in people's responses to willingness-to-pay vs compensation questions in the context of measuring potential economic losses. This paper offers an alternative explanation to this phenomenon. We claim that such differences stem from comparing answers to bounded vs non-bounded questions and that the situation between an interviewer and an interviewee can be seen as partial-information bargain scenario. Our approach is exemplified in the most extreme of cases - projects involving the loss of lives.

Suggested Citation

  • Amiram Gafni & Abraham Ravid, 1989. "The Compensating Variation Approach: The Case of Lives Saved vs Lives Taken," Centre for Health Economics and Policy Analysis Working Paper Series 20, Centre for Health Economics and Policy Analysis (CHEPA), McMaster University, Hamilton, Canada.
    • Handle: RePEc:hpa:wpaper:20
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    File URL: http://www.chepa.org/Files/Working%20Papers/WP%2020.pdf
    File Function: First version, 1989
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    Cited by:

    1. Bernie O'Brien & Amiram Gafni, 1996. "When Do the "Dollars" Make Sense?," Medical Decision Making, , vol. 16(3), pages 288-299, August.

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