Private and public willingness to pay for safety: A validity test

Abstract

Stated preference (SP) methods are often used to elicit an affected population’s preferences for, e.g., increased safety or better environmental quality. SP methods are based on hypothetical market scenarios which have advantages, since decision alternatives are known to the analysis, but also necessitate thorough validity tests of the results, since decisions are hypothetical. This study suggests a validity test based on theoretical predictions and empirical findings for private and public safety measures. According to the test, willingness to pay (WTP) for a public safety measure should exceed or be equal to the private one. Based on a rich data set eliciting both private and public WTP the results show that private WTP exceeds public WTP. Hence, the findings in this study highlight the importance of validity tests of preference estimates for safety, and suggest that WTP also for a private safety measure should be elicited in studies eliciting WTP for public safety measures, to allow for the validity test.