Please use this identifier to cite or link to this item:
Full metadata record
DC FieldValueLanguage
dc.contributor.authorMatthey, Astriden_US
dc.description.abstractExperimental and field evidence show that people perceive and evaluate new risks differently from risks that are common. In particular, people get used to the presence of certain risks and become less eager to avoid them. We explain this observation by including risks in the reference states of individuals, which requires a more general concept of the reference state than has previously been considered in the literature. We find two effects. First, the inclusion of the risk in the reference state changes its evaluation. A risk being present on the market induces a selfenforcing process of increasing acceptance of this risk without any new information becoming available or people's tastes changing. We term this the risk inclusion effect. Second, a risk with lower inherent (reference-independent) utility may be preferred to a risk with higher inherent utility if individuals are more used to accepting the former than the latter. This leads to inefficient decisions if habituation is seen as contributing less to welfare than inherent utility. Both effects have implications for the optimal regulation of risks.en_US
dc.publisher|aSFB 649, Economic Risk|cBerlinen_US
dc.relation.ispartofseries|aSFB 649 discussion paper|x2005,036en_US
dc.subject.keywordrisk perceptionen_US
dc.subject.keywordreference-dependent preferencesen_US
dc.subject.keywordWTA/WTP disparityen_US
dc.subject.keywordhealth risken_US
dc.titleGetting used to risks: reference dependence and risk inclusionen_US
dc.type|aWorking Paperen_US

Files in This Item:
457.39 kB

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.