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Preference updating in public health risk valuation

Author

Listed:
  • Mehmet Kutluay

    (Institute for Environmental Studies, Vrije Universiteit, Amsterdam
    Tinbergen Institute, Amsterdam/Rotterdam)

  • Roy Brouwer

    (Department of Economics and The Water Institute, University of Waterloo, Canada
    Institute for Environmental Studies, Vrije Universiteit, Amsterdam)

  • Richard S. J. Tol

    (Institution Department of Economics, University of Sussex
    Institute for Environmental Studies, Vrije Universiteit, Amsterdam
    Department of Spatial Economics, Vrije Universiteit, Amsterdam
    Tinbergen Institute, Amsterdam)

Abstract

Willingness to pay (WTP) for malaria pills, in light of new risk information and probability weighting, is estimated via a discrete choice experiment (CE). A lottery played prior to the CE yields individual-level probability weighting parameters through Bayesian inference. Over-reaction to new malaria risk information is found as marginal WTP for malaria protection increases by 20-33%. The probability weighting parameter helps to explain the observed variation in malaria valuation, while over or under-weighting of probabilities is found to be correlated with malaria knowledge and experience. This is independent of whether or not the information treatment is received. Over-reaction to new information uncovers potential biases, possibly from simply reminding people about being sick, in placing a monetary value on avoiding uncertain public health risks.

Suggested Citation

  • Mehmet Kutluay & Roy Brouwer & Richard S. J. Tol, 2017. "Preference updating in public health risk valuation," Working Paper Series 1517, Department of Economics, University of Sussex Business School.
    • Handle: RePEc:sus:susewp:1517
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    File URL: http://www.sussex.ac.uk/economics/documents/wps-15-2017.pdf
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    References listed on IDEAS

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    Cited by:

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    More about this item

    Keywords

    probability weighting; malaria; valuation; information shock; Bayesian inference;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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