EconPapers    
Economics at your fingertips  
 

A quantification of prospect theory in the health domain

Arthur Attema, Werner Brouwer () and Olivier l'Haridon

Economics Working Paper Archive (University of Rennes 1 & University of Caen) from Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS

Abstract: It is well-known that expected utility (EU) has empirical deficiencies. Prospect theory (PT) has developed as an alternative with more descriptive validity. However, PT’s full function had not yet been quantified in the health domain. This paper is therefore the first to simultaneously measure utility of life duration, probability weighting, and loss aversion in the health domain. We observe loss aversion and risk aversion for gains and losses, which for gains can be explained by probabilistic pessimism. Utility for gains is almost linear. For losses, we find less weighting of probability 1/2 and concave utility. This contrasts with the common finding of convex utility for monetary losses. However, PT was proposed to explain choices among lotteries involving small outcomes. Life years are arguably not ‘small’ and need not generate convex utility for losses. Moreover, utility of life duration reflects discounting, causing concave utility. These results are a first step in fitting non-EU models for health-related decisions.

Keywords: prospect theory; life duration; QALY (search for similar items in EconPapers)
JEL-codes: D90 (search for similar items in EconPapers)
Date: 2013-06
New Economics Papers: this item is included in nep-hea and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19) Track citations by RSS feed

Downloads: (external link)
https://ged.univ-rennes1.fr/nuxeo/site/esupversion ... a0-b7c6-2bd95d260d65 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tut:cremwp:201321

Ordering information: This working paper can be ordered from
CREM (UMR CNRS 6211) - Faculty of Economics, 7 place Hoche, 35065 Rennes Cedex - France

Access Statistics for this paper

More papers in Economics Working Paper Archive (University of Rennes 1 & University of Caen) from Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS CREM (UMR CNRS 6211) – Faculty of Economics, 7 place Hoche, 35065 RENNES Cedex. Contact information at EDIRC.
Bibliographic data for series maintained by GERMAIN Lucie ().

 
Page updated 2020-04-01
Handle: RePEc:tut:cremwp:201321