This paper sets out to illustrate how anxiety may be incorporated into a formal decision theoretic utility model of choice, and to suggest several measurement procedures towards that end. The major propositions derived and posited in this paper lend considerable support to intuitive notions with respect to the effects of anxiety on human behaviour in risky decision situations. Namely, that the willingness of an individual to pay to reduce health risks (an economic indicator of individual welfare associated with reduced morbidity or increased longevity) tends to be positive and higher when anxiety is present than when it is not. The formal results of the analysis show that when psychological considerations are incorporated into a state‐dependent utility model, the normative results customarily obtained concerning valuc‐of‐life need to be qual