Your Money or Your Life: A Prescriptive Model for Health, Safety, and Consumption Decisions

James E. Smith () and Ralph L. Keeney ()
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James E. Smith: Fuqua School of Business, Duke University, Durham, North Carolina 27708
Ralph L. Keeney: Fuqua School of Business, Duke University, Durham, North Carolina 27708

Management Science, 2005, vol. 51, issue 9, 1309-1325

Abstract: In this paper we develop a conceptual framework and model for valuing risks to an individual's health and life and to support decision making about investments in health, quality of life, and safety. Our treatment of health risks in the model builds on the popular quality-adjusted-life-year (QALY) framework that balances health quality and length of life issues. We extend this framework to consider financial concerns as well as health quality and length of life. Our model considers uncertainty in income and health and incorporates the decision maker's ability to adjust consumption over time in response to changes in expectations about health and income. We use this model to study the optimal tradeoffs between financial gains or losses and improvements or reductions in health or longevity and apply it in two example medical decision problems.

Keywords: decision analysis; QALYs; consumption health and safety decisions; valuing health outcomes; time preference; value tradeoffs (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (28)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:51:y:2005:i:9:p:1309-1325

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