Abstract
Prevention decisions that reduce individuals’ morbidity risks are important, generally irreversible, and particularly difficult since they imply a trade-off between two important attributes: the safety and its cost. All those features make regret more likely to be anticipated. In this paper, we study the willingness to pay for reductions in morbidity risks within a framework of anticipated regret. As results, we find that with other things being equal, an individual who is disproportionately averse to large regrets has a higher willingness to pay than a standard expected utility individual. This notion of regret aversion has been shown to be relevant for regret theory to reconcile with many decision patterns which are not in line with standard expected utility theory. Moreover, the effect induced by this notion of regret aversion can be interpreted as if the regret averse individual overweighs risk reductions due to prevention, i.e., probability weighting effect. We further discuss how the resolution of uncertainty may affect the regret averse individual’s willingness to pay, and how the attribution effect in belief formation may bias its estimates.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.