Scandinavian Working Papers in Economics
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School of Business, Örebro University Working Papers, School of Business, Örebro University

No 2007:2:
Willingness to Pay for Private and Public Safety: Why the Difference?

Mikael Svensson () and Maria Vredin Johansson

Abstract: Previous research on the willingness to pay (WTP) for risk reductions has almost systematically found the mean WTP for public risk reductions to be, both economically and statistically, significantly smaller than the mean WTP for private risk reductions. In this paper, we use socio-economic and social-psychological variables to gain insights into this, according to economic theory, anomalous result. Based on the results from a purpose-made survey, we find that part of the discrepancy can be explained by the individuals' age and his/her attitudes towards privately and publicly provided goods in general. Due to differences in attitudes, the public and private goods are in fact perceived as a two different goods, even if the risk reductions are of equal magnitudes. The results therefore suggest that, in cases where the elicited WTP is intended for public policy purposes, the survey context need to be public is consumer sovereignty should reign.

Keywords: Contingent Valuation; Private Safety; Public Safety; Attitudes; (follow links to similar papers)

JEL-Codes: D81; J28; Q51; (follow links to similar papers)

33 pages, April 30, 2007

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This paper is published as:
Svensson, Mikael and Maria Vredin Johansson, (2010), 'Willingness to Pay for Private and Public Safety: Why the Difference?', Accident Analysis & Prevention, Vol. 42, pages 1205-1212

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