An Empirical Model of Demand for Future Health States when Valuing Risk-Mitigating Programs
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Date
2004-03
Authors
Cameron, Trudy Ann
DeShazo, J. R.
Journal Title
Journal ISSN
Volume Title
Publisher
University of Oregon, Dept. of Economics
Abstract
We develop a structural option price model in which individuals choose among competing
risk-mitigating programs to alter their probability of experiencing future years in various degraded health states. The novel aspects of this model include separate estimates of the
marginal utilities of avoiding years of morbidity and lost life-years. With these marginal utilities, we may evaluate a broad spectrum of probabilistic health outcomes over any period
of an individual’s future life. The model also reduces potential biases associated with singleperiod, single-risk models typically used to produce estimates of the Value of a Statistical
Life (VSL) by allowing individuals to substitute risk mitigation across competing sources of
risk and across future years of their lives. We evaluate this model using data from a national
survey that contains a choice experiment on demand for the mitigation of illness-specific
risks.
Description
51 p.
Keywords
Value of a statistical life, Mortality risk, Morbidity risk, Health, Option price