Question

Suppose you can take one of two summer jobs. In the first job as a flight attendant, with a salary of $5,000, you estimate the probability you will die is 1 in 40,000. Alternatively, you could drive a truck transporting hazardous materials, which pays $12,000 and for which the probability of death is 1 in 10,000. Suppose that you're indifferent between the two jobs except for the pay and the chance of death. If you choose the job as a flight attendant, what does this say about the value you place on your life?

Answer 1

Expected Value when flight attendant = 5000*(1 - 1*(1/40000)) =  $4999.88

Expected Value when truck driver = 12000*(1-1*(1/10000)) = $11998.8

Above calculation shows that expected earning is higher with the truck driver job, but willing to opt for the job o flight attendant means the person is placing higher value to the life that is making monetary gains in the job of truck driver less significant. Hence, wage differentials is not significant for the person and person is more concerned about live and gives higher value to it.