Who purchased the cheaper car willing to accept to save

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Assume that a new car hits that market that has been shown to have a lower risk of fatal accident. In particular, 1/5000 cars is expected to result in fatal accident. The risk of fatal accident for the same car without the new safety features is 1/1000. The new (safer) car sells for $39,000. The comparable vehicle without the safety feature sells for $28,000. Assume that 2,000 cars of each type are sold.

a. How much additional risk is each person who purchased the cheaper car willing to accept to save $11,000?

b. What is the combined dollar amount all individuals who purchased the cheaper car are willing to receive in exchange for the extra risk? How many additional lives will be lost for these 2000 individuals?

c. What is the statistical value of one life based on this information?

Reference no: EM13225035

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