Details

Autor(en) / Beteiligte

• Attema, Arthur E.
• Brouwer, Werner B.F.
• l’Haridon, Olivier

Titel

Prospect theory in the health domain: A quantitative assessment

Ist Teil von

• Journal of health economics, 2013-12, Vol.32 (6), p.1057-1065

Ort / Verlag

Netherlands: Elsevier B.V

Erscheinungsjahr

2013

Quelle

Applied Social Sciences Index & Abstracts (ASSIA)

Beschreibungen/Notizen

• •This paper is the first to elicit cumulative prospect theory's parameters in the health domain.•We observe risk aversion for both gained and lost life years.•For gains, this was attributed to underweighting the probability of the best outcome.•For losses, it can be explained by a concave utility function.•We also find a significant amount of loss aversion. It is well-known that expected utility (EU) has empirical deficiencies. Cumulative prospect theory (CPT) has developed as an alternative with more descriptive validity. However, CPT'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 this 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, CPT was proposed to explain choices among lotteries involving monetary outcomes. Life years are arguably very different from monetary outcomes and need not generate convex utility for losses. Moreover, utility of life duration reflects discounting, causing concave utility.