The Price of Safety

Abstract
This article presents a simple economic model to assess consumers‘ valuation of safety features. In particular, we model the benefit from safety as the reduction in the probability of death, and the associated economic value of this reduction. We then apply this theoretical model to investigate market valuation of antilock brakes and airbags via the specification and estimation of a hedonic price equation. Results indicate that consumers behave in a manner consistent with the economic model we develop.
Volume
23
Page
12 ‐ 25
Number
1
Year
1996
Categories
Behavioral Insurance
Publications
Journal of Consumer Research
Authors
Boulding, William
Purohit, Devavrat