Stated-preference tradeoffs between regulatory costs and benefits: testing unit asking and double framing effects

Abstract

A novel stated-preferences approach to imputing the value of life to estimate regulatory benefits elicits people’s preferred tradeoffs on behalf of the nation between national regulatory costs and nation-wide regulatory benefits, in contrast to the conventional approach of seeking estimates of the ‘value of a statistical life’ (VSL) by asking subjects how much they would be willing to pay personally for a small reduction in their own mortality risk. Two national-preference survey experiments were pursued here. The first U.S. experiment (n = 396) offered a between-person test of the effect of asking people to evaluate a hypothetical single life prolonged by regulation, before assessing the tolerable cost to the national economy of a hypothetical regulation prolonging 100 lives (LF frame). This unit asking task increased imputed means for the social benefit of a life prolonged (SB1LP*) in national tradeoffs. Cautions to respondents about responses that generated particularly low implicit SB1LP* values did not substantively reduce implausible values. The second U.S. experiment (n = 505) had people respond to both the lives-first (LF) frame, preceded by a unit asking task, and the costs-first (CF) frame (i.e. eliciting ‘reasonable’ numbers of lives prolonged if estimated regulatory cost is $1 billion each year). These frames both mimic the kinds of decisions that regulators face, as the VSL stated preference method does not. Higher LF values in earlier between-person studies were replicated in the unit asking within-person design here. A partial order effect occurred for the second experiment: starting with the CF frame yielded a subsequent LF mean four times higher. Open-ended probing found beliefs that regulatory costs are justified only by prolonging many lives may explain lower CF values. Using both frames can inform both conventional stated preference research (which uses only the LF frame) and regulators.