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Risk perception and the value of safety
T L McDaniels1, M S Kamlet, G W Fischer
1School of Planning, University of British Columbia, Vancouver, Canada.
Summary
Understanding perceived risk is key to determining willingness-to-pay (WTP) for technological safety. Factors like dread, knowledge, and exposure significantly influence how much people will pay for risk reduction.
Area of Science:
- Environmental Economics
- Risk Analysis
- Behavioral Economics
Background:
- Technological advancements introduce various hazards.
- Assessing public perception of these risks is crucial for safety policy.
- Willingness-to-pay (WTP) is a key metric for valuing risk reduction.
Purpose of the Study:
- To investigate the relationship between perceived risk and WTP for safety from technological hazards.
- To develop and test a conceptual model incorporating socioeconomic and perceived hazard characteristics.
- To differentiate WTP drivers for well-defined versus less well-defined technological risks.
Main Methods:
- Developed a conceptual model linking WTP to income, base risk, dread, knowledge, and exposure.
- Utilized a combined contingent valuation and risk perception survey.
- Employed TOBIT econometric estimation procedures for data analysis.
- Analyzed 10 distinct technological hazards, categorized as well-defined or less well-defined.
Main Results:
- Both socioeconomic variables and perceived hazard characteristics significantly explain WTP.
- For well-defined hazards, perceived personal exposure is the primary driver of WTP.
- For less well-defined risks, dread and severity perception most strongly influence WTP.
Conclusions:
- Perceived risk characteristics, alongside socioeconomic factors, are vital in understanding WTP for safety.
- The nature of the hazard (well-defined vs. less well-defined) alters the key determinants of WTP.
- Findings inform targeted risk communication and safety investment strategies.