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Risk Valuation in the Presence of Risky Substitutes: An Application to Demand for Seafood

Published online by Cambridge University Press:  28 April 2015

Ju-Chin Huang ,
Timothy C. Haab  and
John C. Whitehead
Ju-Chin Huang
Affiliation:
Department of Economics, University of New Hampshire, Durham, NH
Timothy C. Haab
Affiliation:
Department of Agricultural, Environmental and Development Economics, Ohio State University, Columbus, OH
John C. Whitehead
Affiliation:
Department of Economics and Finance, University of North Carolina, Wilmington, NC
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Abstract

We attempt to value health risks by combining traditional demand impact analysis with direct elicitation of individuals' risk perceptions of food safety. We examine the impact of multiple risks of related goods on consumption of a risky good. We argue that the consumption of a risky good depends on both its absolute risk level and its relative risks to other risky goods. Seafood consumption in eastern North Carolina was studied. We elicited, in a survey, individual perceived risks as reference points to derive the economic value of reducing health risk in seafood consumption. Revealed and stated data were combined to trace out demand changes in response to absolute and relative risk reductions. Our results show that seafood consumption is affected by the perceived absolute risk and by the relative risk to poultry and that individuals react to the multiple risks in a nonlinear way, as was suggested by our analytical model.

Keywords

Absolute and Relative RisksFood Borne Health RiskRevealed and Stated DataRisk SubstitutesD1D8I12Q21
Type
Articles
Information
Journal of Agricultural and Applied Economics , Volume 36 , Issue 1 , April 2004 , pp. 213 - 228
Copyright
Copyright © Southern Agricultural Economics Association 2004

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