Risk Perception, Learning and Willingness to Pay to Reduce Heart Disease Risks

University of Verona Department of Economics Working Paper No. 11

51 Pages Posted: 10 Nov 2020

See all articles by Mark Dickie

Mark Dickie

University of Central Florida - College of Business Administration - Department of Economics

Shelby Gerking

University of Central Florida - College of Business Administration - Department of Economics

Wiktor Adamowicz

University of Alberta

Marcella Veronesi

University of Verona - Department of Economics; Center for Development and Cooperation (NADEL)

Date Written: June 17, 2020

Abstract

The paper investigates the validity of individuals’ perceptions of heart disease risks, and examines how information and risk perceptions affect marginal willingness to pay (MWTP) to reduce risk, using data from a stated preference survey. Results indicate that risk perceptions individuals held before receiving risk information are plausibly related to objective risk factors and reflect individual-specific information not found in aggregate measures of objective risk. After receiving information, individuals’ updates of prior risk assessments are broadly consistent with Bayesian learning. Perceived heart disease risks thus satisfy construct validity and provide a valid basis for inferring MWTP to reduce risk. Estimating MWTP based on objective rather than subjective risks causes misleading inferences about benefits of risk reduction. An empirical case study shows that benefits are 36% to 62% higher when estimated using objective rather than subjective risks, showing the importance of employing risk perception information to improve validity of benefit measures.

Keywords: risk perception, willingness to pay, subjective probability, information, Bayesian, heart disease

JEL Classification: D61, I12, I38, J13, Q51, Q58

Suggested Citation

Dickie, Mark and Gerking, Shelby and Adamowicz, Wiktor and Veronesi, Marcella, Risk Perception, Learning and Willingness to Pay to Reduce Heart Disease Risks (June 17, 2020). University of Verona Department of Economics Working Paper No. 11, Available at SSRN: https://ssrn.com/abstract=3633480 or http://dx.doi.org/10.2139/ssrn.3633480

Mark Dickie

University of Central Florida - College of Business Administration - Department of Economics ( email )

Orlando, FL 32816-1400
United States

Shelby Gerking

University of Central Florida - College of Business Administration - Department of Economics ( email )

Orlando, FL 32816-1400
United States

Wiktor Adamowicz

University of Alberta ( email )

Edmonton, Alberta T6G 2R3
Canada

Marcella Veronesi (Contact Author)

University of Verona - Department of Economics ( email )

Via Cantarane 24
Verona, 37129
Italy

Center for Development and Cooperation (NADEL) ( email )

Zürichbergstrasse 18
8092 Zurich, CH-1015
Switzerland

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