The value of disease prevention vs treatment

Christoph Rheinberger, Daniel Herrera-Araujo and James Hammitt

PSE-Ecole d'économie de Paris (Postprint) from HAL

Abstract: We present an integrated valuation model for diseases that are life-threatening. The model extends the standard one-period value-per-statistical-life model to three health prospects: healthy, ill, and dead. We derive willingness-to-pay values for prevention efforts that reduce a disease's incidence rate as well as for treatments that lower the corresponding health deterioration and mortality rates. We find that the demand value of prevention always exceeds that of treatment. People often overweight small risks and underweight large ones. We use the rank dependent utility framework to explore how the demand for prevention and treatment alters when people evaluate probabilities in a non-linear manner. For incidence and mortality rates associated with common types of cancers, the inverseS shaped probability weighting found in experimental studies leads to a significant increase in the demand values of both treatment and prevention.

Keywords: JEL classification:; D11; D81; I10; Keywords:; Health risk valuation; Chronic disease; Willingness-to-pay; Probability weighting (search for similar items in EconPapers)
Date: 2016-12
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Citations: View citations in EconPapers (10)

Published in Journal of Health Economics, 2016, 50, pp.247 - 255. ⟨10.1016/j.jhealeco.2016.08.005⟩

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Journal Article: The value of disease prevention vs treatment (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:pseptp:halshs-01626801

DOI: 10.1016/j.jhealeco.2016.08.005

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