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

Viscusi et al. (1987)
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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.