The gap between willingness-to-pay (WTP) and willingness-to-accept (WTA) benefit values typifies situations in which reference points — and direction of movement from reference points — are consequential. Why WTA-WTP discrepancies arise is not well understood. We generalize models of...

The value of a statistical life (VSL) monetizes the expected loss in well-being associated with the risk of death. The utility loss resulting from a fatality is central to the empirical framework for estimating the VSL. The VSL trajectory over the life cycle exhibits an inverted-U shape,...

The U.S. Food and Drug Administration (FDA) balances risks and benefits before approving pharmaceuticals, as rationality would require. But powerful behavioral biases that lead to the mishandling of uncertainty also influence its approval process. The FDA places inordinate emphasis on errors of...

Risk equity serves as the purported rationale for a wide range of inefficient policy practices, such as the concern that hypothetical individual risks not be too great. This paper proposes an alternative risk equity concept in terms of equitable tradeoffs rather than equity in risk levels....

Using a large data set, the authors find that smokers select riskier jobs, but receive lower total wage compensation for risk than do nonsmokers. This finding is inconsistent with conventional models of compensating differentials. The authors develop a model in which worker risk preferences and...

This article reviews economic evidence on health-dependent utility functions and presents new estimates of utility functions for cancer. Estimates of health-dependent utility functions have found that mild adverse health impacts can be treated as monetary equivalents. Severe health consequences...