The value of risk‐free cigarettes – do smokers underestimate the risk?

Abstract

The health risk of smoking is valued using the contingent valuation method, applied to a Swedish sample of smokers. The respondents were asked to put a value on newly developed cigarettes with no associated health risks. The average additional willingness to pay for the new cigarettes is estimated to be between10 and 41 SEK per packet. Using medical data on life shortening effects of smoking, the results indicate fairly reasonable values put on a lost life year, compared to existing estimates based on other methods. However, there are remaining methodological questions and we found little sensitivity to scope.

A Note on Smoking Behavior and Health Risk Taking

“…3 This assumption is at least partly consistent with previous empirical findings that smokers have lower risk beliefs about the negative health effects of smoking (e.g., lung cancer and mortality risk) and that such risk beliefs negatively affect the probability to smoke (Viscusi, 1990;Liu and Hsieh, 1995;Hammar and Johansson-Stenman, 2004;Lundborg and Lindgren, 2004;Viscusi and Hakes, 2008;Lundborg and Andersson, 2008). 4 Extreme examples would be that a completely risk averse individual perceives the risk of lung cancer due to smoking as so high that he expects to be dead for sure, whereas the extreme risk taker might not really care about this risk (e.g., a gamble to cheat death).…”

Willingness-to-Pay and Demand Curves: A Comparison of Results Obtained Using Different Elicitation Formats

“…The function can guide price-setting, by offering a forecast of likely future revenues at various prices and by enabling, via elasticity estimation, assessments of likely quantity responses to price variations. WTP valuation also enables producers to assess the revenue potential of developing improved characteristics of existing products, for example, smoking cessation treatments which are more effective than those currently marketed (Busch et al, 2004) or, in complete contrast, cigarettes with no attendant health risks (Hammar and Johansson-Stenman, 2004). Naturally, this revenue potential needs to be set against the expected costs of effecting the improvements in characteristics, in order to gauge the likely profitability of such product development.…”

Smoking in Germany: Stylized Facts, Behavioral Models, and Health Policy

“…Within this model, addiction is indeed voluntary, but not intentional. In this context, Hammar and Johansson-Stenman (2004) conclude that smokers seem to underestimate the health risk of smoking.…”