Living up to expectations: Experimental tests of subjective life expectancy as reference point in time trade-off and standard gamble

Stefan A. Lipman, Werner Brouwer and Arthur Attema

Journal of Health Economics, 2020, vol. 71, issue C

Abstract: Earlier work suggested that subjective life expectancy (SLE) functions as reference point in time trade-off (TTO), but has not tested or modelled this explicitly. In this paper we construct a model based on prospect theory to investigate these predictions more thoroughly. We report the first experimental test of reference-dependence with respect to SLE for TTO and extend this approach to standard gamble (SG). In two experiments, subjects’ SLEs were used to construct different versions of 10-year TTO and SG tasks, with the gauge duration either described as occurring above or below life expectation. Our analyses suggest that both TTO and SG weights were affected by SLE as predicted by prospect theory with SLE as reference point. Subjects gave up fewer years in TTO and were less risk-tolerant in SG below SLE, implying that weights derived from these health state valuation methods for durations below SLE will be biased upwards.

Keywords: Time trade-off; Standard gamble; QALY model; Prospect theory; Subjective life expectancy; Reference point (search for similar items in EconPapers)
JEL-codes: D9 I1 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jhecon:v:71:y:2020:i:c:s0167629619302279

DOI: 10.1016/j.jhealeco.2020.102318

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