Willingness to Pay and Sensitivity to Time Framing: A Theoretical Analysis and an Application on Car Safety∗

Stated preference (SP) surveys attempt to obtain monetary values for non-market goods that reflect individuals ’ “true ” preferences. Numerous empirical studies suggest that monetary values from SP studies are sensitive to survey design and so may not reflect respondents ’ true preferences. This study examines the effect of time framing on respondents ’ willingness to pay (WTP) for car safety. We explore how WTP per unit risk reduction depends on the time period over which respondents pay and face reduced risk in a theoretical model and by using data from a Swedish contingent valuation survey. We find that WTP is sensitive to time framing; the theoretical model predicts that the effect is likely to be nontrivial, and empirical estimates from an annual scenario are about 70 percent higher than estimates from a monthly scenario