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Baseline risk and marginal willingness to pay for health risk reduction
Empirical results presented in this paper suggest that parents’ marginal
willingness to pay (MWTP) for a reduction in morbidity risk from heart disease is
inversely related to baseline risk (i.e., the amount of risk initially faced) both for
themselves and for their children. For instance, a 40% reduction from the mean of
baseline risk results in an increase in MWTP by 70% or more. Thus, estimates of
monetary benefits of public programs to reduce heart disease risk would be understated
if the standard practice is followed of evaluating MWTP at initial risk levels and then
multiplying this value by the number of cases avoided. Estimates are supported by: (1)
unique quantitative information on perceptions of the risk of getting heart disease that
allow baseline risk to be defined at an individual level and (2) improved econometric
procedures to control for well-known difficulties associated with stated preference data
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