An age-embedding effect: time sensitivity and time insensitivity when pricing health benefits

Benefits are often extended over time. One determinant of this benefit dura tion is how long a person will live to enjoy them. In four studies, we inve stigated whether people are sensitive to age when pricing benefits that wil l last for the remainder of one's life. In Study I drivers gave their willi ngness-to-pay (WTP) to cure a medical condition which would stop them from driving. Results showed an age-embedding effect: WTP was unrelated to the e stimated number of driving years left. Study 2 tested whether age-embedding arose because people have a lot of information about themselves which dilu tes the impact of age on their valuations. In Studies 3 and 4 we investigat ed whether people believed that age was an important consideration, or if t hey failed to properly incorporate it into their judgment. Results indicate that little weight is given to age when making individual pricing decision s, although people did not believe it was normatively irrelevant. (C) 2001 Elsevier Science BN. All rights reserved