Estimating sign-dependent societal preferences for quality of life

Arthur E. Attemaa, Werner B.F. Brouwer, Olivier l’Haridon, Jose Luis Pinto

Research output: Contribution to journalArticle

Abstract

This paper is the first to apply prospect theory to societal health-related decision making. In particular, we allow for utility curvature, equity weighting, sign dependence, and loss aversion in choices concerning quality of life of other people. We find substantial inequity aversion, both for gains and losses, which can be attributed to both diminishing marginal utility and differential weighting of better-off and worse-off. There are also clear framing effects, which violate expected utility. Moreover, we observe loss aversion, indicating that subjects give more weight to one group’s loss than another group’s gain of the same absolute magnitude. We also elicited some information on the effect of the age of the studied group. The amount of inequity aversion is to some extent influenced by the age of the considered patients. In particular, more inequity aversion is observed for gains of older people than gains of younger people.
Original languageEnglish
Pages (from-to)229-243
Number of pages15
JournalJournal of Health Economics
Volume43
DOIs
Publication statusPublished - Sep 2015

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Keywords

  • equity weighting
  • health-related social welfare function
  • loss aversion
  • prospect theory
  • QALYs

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