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Incorporating Uncertainty in Risk Communication and Policy Analysis and Benefit Evaluation for Environmental Regulation(1991)

Paper Number: EE-0223

Document Date: 01/25/1991

Author(s):  Viscusi, W. Kip; Magat, Wesley A; Huber, Joel

Subject Area(s): Economic Analysis, Benefits Analysis, Human Health Benefits Stated Preference Methods, Contingent Valuation, Conjoint Analysis,  Uncertainty

Keywords: Economic Analysis, Benefits Analysis, Human Health Benefits Stated Preference Methods, Contingent Valuation, Conjoint Analysis,  Uncertainty


This report includes three chapters:

1.  Issues in Valuing Health Risks: Applications of Contingent Valuation and Conjoint Measurement to Nerve Diseases and Lymphoma

  • This chapter assesses the ability of the contingent valuation method to value reductions in the risks of long-term health effects caused by environmental pollutants. The authors use a computer-based survey approach to elicit choices among locations to live that differ for the subjects in attributes such as their risks of contracting a chronic disease, their risks of dying in an automobile accident, and their costs of living. From paired comparisons of different locations, the authors infer respondents' rates of trade-off between reducing the risks of chronic diseases and the automobile death risk as well as their rates of trade-off disease risks with cost of living. The value of reducing the risks from both a nerve disease (peripheral neuropathy) and lymphoma (cancer of the lymph system) are measured. -

2. Communication of Ambiguous Risk Information

  • This chapter reports on the responses of 646 individuals to environmental risk information involving different forms of risk ambiguity. Section 2 of this chapter introduces the study and provides the basic elements of the test of whether ambiguity maters. Section 3 indicates how the order of presentation of the ambiguous information influences attitudes toward the risk. Section 4 introduces a complication involving the order in which risk studies have been carried out. Section extends the analysis of ambiguous risk beliefs to consider the role of skewness in the risk information that is provided. Section 6 summarizes the authors' principal conclusions pertaining to risk ambiguity.

3. Bayesian Expected Utility with Ambiguous Belief Aversion

  • This chapter examines the effect of ambiguous environmental risk information on lottery preferences using a sample of 646 adults. It addresses two broad classes of issues: First, how do individuals process multiple pieces of risk information; second, is there an aversion to ambiguous risk beliefs once one takes into account the Bayesian decision context? Section 2 of this Chapter outlines the model of decision what the authors test; section 3 discusses the estimating equation; and section 4 presents the empirical results. 

This report is part of the  Environmental Economics Research Inventory.

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