Utility Functions for Mild and Severe Health Risks

44 Pages Posted: 7 Nov 2018

See all articles by W. Kip Viscusi

W. Kip Viscusi

Vanderbilt University - Law School; National Bureau of Economic Research (NBER); Vanderbilt University - Department of Economics; Vanderbilt University - Owen Graduate School of Management; Vanderbilt University - Strategy and Business Economics

Date Written: November 5, 2018

Abstract

This article reviews economic evidence on health-dependent utility functions and presents new estimates of utility functions for cancer. Estimates of health-dependent utility functions have found that mild adverse health impacts can be treated as monetary equivalents. Severe health consequences also reduce utility levels but have an additional effect of altering the structure of utility functions by reducing the marginal utility of income. The implications of past studies are often misleading when they fail to account for income losses and medical expenses associated with serious ailments. This article’s estimates of the structure of utility functions for cancer indicate a substantially lower marginal utility of income at any given income level. This result is consistent with the welfare consequences of other severe health effects, which impose harms that are not tantamount to a monetary loss.

Keywords: cancer, utility, health risk, willingness to pay

JEL Classification: I10, K13, K32, D8

Suggested Citation

Viscusi, W. Kip, Utility Functions for Mild and Severe Health Risks (November 5, 2018). Journal of Risk and Uncertainty, Forthcoming; Vanderbilt Law Research Paper No. 18-56. Available at SSRN: https://ssrn.com/abstract=3279055

W. Kip Viscusi (Contact Author)

Vanderbilt University - Law School ( email )

131 21st Avenue South
Nashville, TN 37203-1181
United States
615-343-7715 (Phone)
615-322-5953 (Fax)

HOME PAGE: http://law.vanderbilt.edu/faculty/viscusi.htm

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Vanderbilt University - Department of Economics

Box 1819 Station B
Nashville, TN 37235
United States
(615) 343-7715 (Phone)
(615) 343-5953 (Fax)

HOME PAGE: http://law.vanderbilt.edu/faculty/viscusi.htm

Vanderbilt University - Owen Graduate School of Management

401 21st Avenue South
Nashville, TN 37203
United States
(615) 343-7715 (Phone)
(615) 343-5953 (Fax)

HOME PAGE: http://law.vanderbilt.edu/faculty/viscusi.htm

Vanderbilt University - Strategy and Business Economics ( email )

Nashville, TN 37203
United States

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