Andersson, Henrik, Hammitt, James K., Lindberg, Gunnar and Sundström, Kristian (2011) Willingness to Pay and Sensitivity to Time Framing: A Theoretical Analysis and an Application on Car Safety. LERNA Working Paper, n. 11.20.354

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Abstract

Stated preference (SP) surveys attempt to obtain monetary values for non-market goods that reflect individuals’ “true” preferences. Numerous empirical studies suggest that monetary values from SP studies are sensitive to survey design and so may not reflect respondents’ true preferences. This study examines the effect of time framing on respondents’ willingness to pay (WTP) for car safety.We explore how WTP per unit risk reduction depends on the time period over which respondents pay and face reduced risk in a theoretical model and by using data from a Swedish contingent valuation survey. We find that WTP is sensitive to time framing; the theoretical model predicts that the effect is likely to be nontrivial, and empirical estimates from an annual scenario are about 70 percent higher than estimates from a monthly scenario.