Social willingness to pay, mortality risks and contingent valuation

The Willingness-to-Pay approach is the basic justification for the use of the Contingent Valuation method to evaluate public mortality risk reduction programs. However, aggregating unweighted willingness-to-pay is a valid method only when individuals have the same marginal value of money, an unrealistic assumption in the presence of heterogeneity. We show that heterogeneity on wealth and baseline risk ( respectively on risk reduction) leads to systematically overestimate ( respectively underestimate) the social value of a risk reduction program. Using a recently published Contingent Valuation analysis, we find this overestimation to be quite modest though, approximately 15% in an upper bound case.