Willingness-to-pay approach

The willingness to pay approach to establishing decision criteria assumes that it is only the risk versus cost equation that matters. In practice, people have other concerns as well. For example, there is a question of involvement in process - have the kind of people affected by risk been involved in making decisions about it Is it really the level of risk that worries people, or is it concern about the competence of the industry in managing safety Is it the perceived motivation for decisions (whether taken by industry or by Government) that concerns people ... 

Factoring in a richer range of concerns and preferences than are expressible via the Willingness to Pay approach. 

Hanvelt et al. (1994) estimated the nationwide indirect costs of mortality due to HIV/AIDS in Canada. A descriptive, population-based economic evaluation study was conducted. Data from Statistics Canada were used, which contained information about aU men aged 25-64 years for whom HIV/AIDS or another selected disease was listed as the underlying cause of death from 1987 to 1991. Based on the human capital approach, the present value of future earnings lost for men was calculated. The estimated total loss from 1987 to 1991 was US 2.11 billion, with an average cost of US 558,000 per death associated with HIV/AIDS. Future production loss due to HIV/AIDS was more than double during the period 1987 to 1991, from US 0.27 to US 0.60 billion. A more comprehensive update of this smdy was presented by Hanvelt et al. (1996). The same database and the same data section but for the calendar years 1987-1993 was used. The indirect cost of future production due to HIV/AIDS in Canada based on the human capital approach for that period was estimated to be US 3.28 billion. The authors also calculated the willingness-to-pay to prevent premature death due to HIV/AIDS, which was estimated based on... 

Broadly speaking, there are two alternative approaches for empirical economic valuation of health changes and health risks the human captial (ffC) approach and the willingness to pay (WTP) approach. Both alternatives will be briefly described and compared before a closer look is taken at the estimation methods involved in the latter approach. Estimates of the value of a statistical life will also be discussed, in particular their relation to the estimation methods used. 

ABSTRACT The increased use of wireless networks in schools has created concern among many parents and scientists is the low levels microwave radiation emitted by the transmitters harmful The scientific community does not provide a clear answer, there are uncertainties about the consequences of the radiation. This has raised the issue of applying the precautionary principle and switch off the wireless networks and use a safer alternative, for example a cable system. However, the decision-makers argue that the uncertainties and the risk need to be balanced with the benefits of the activity. Some type of cost-benefit analysis is required. But it is not obvious how such an analysis should he performed in a case like this, and the purpose of this paper is to present and discuss two possible approaches, one based on willingness to pay and one based on expected net present value calculations. 

Hammerschmidt, T, Zeitler, H.R and Leidl, R. (2003) Unexpected yes- and no-answering behaviour in the discrete choice approach to elicit willingness to pay A methodological comparison with payment cards. International Journal of Health Care Finance and Economics, 3 147-166. 

Annual traffic fatalities prevented range in steady state from 2,050 if belt use is 23 percent to 8,750 if belt use is 60 percent. The higher estimate is quite close to that of Arnould and Grabowski for NHTSA s estimate of effectiveness. The valuation of the safety benefits is based on a foregone earnings approach instead of the willingness to pay, and the values of risk reduction are lower than in other studies. ... 

---