An Investigation of the Rationality of Consumer Valuations of Multiple Health Risks.

Viscusi et al. (1987)
Summary by 
Mark Egan

This paper looks at risk preferences. An interesting example is the premium that people are willing to pay for zero-risk through the following hypothetical: “Consider a $10 pesticide that produces a toxic reaction 15 times for every 10,000 times used. How much is an equally effective pesticide worth if it reduces the risk to 10 /5/0 incidences per 10,000 uses?”Results showed people would pay $1.04 extra for the reduction from 15 to 10 reactions and $2.41 extra for the reduction from 5 to 0. People valued absolute elimination of risk disproportionately more than mere reduction in probability of harm.