The predictive validity of prospect theory versus expected utility in health utility measurement

• Published in: Journal of health economics Vol. 28; no. 6; pp. 1039 - 1047
• Main Authors: Abellan-Perpiñan, Jose Maria, Bleichrodt, Han, Pinto-Prades, Jose Luis
• Format: Journal Article
• Language: English
• Published: Netherlands Elsevier B.V 01-12-2009; Elsevier; Elsevier Sequoia S.A
• Series: Journal of Health Economics
• Subjects: Adult; Algorithms; Choice Behavior; Contextual analysis; Decision making; Expected utility; Female; Forecasting; Forecasts; Health administration; Health care; Health economics; Health Status; Health utility measurement; Health utility measurement Prospect theory Expected utility Standard gamble Time trade-off; Hierarchy; Humans; Male; Measurement; Models, Theoretical; Prospect theory; Quality of Life; Ranking; Risk management; Spain; Standard gamble; Stimuli; Studies; Time trade-off; Utility theory; Validity; Young Adult; Spain; Standard gamble; Prospect theory; I10; D81; Expected utility; Time trade-off; Health utility measurement
• ISSN: 0167-6296; 1879-1646
• DOI: 10.1016/j.jhealeco.2009.09.002

Most health care evaluations today still assume expected utility even though the descriptive deficiencies of expected utility are well known. Prospect theory is the dominant descriptive alternative for expected utility. This paper tests whether prospect theory leads to better health evaluations than expected utility. The approach is purely descriptive: we explore how simple measurements together with prospect theory and expected utility predict choices and rankings between more complex stimuli. For decisions involving risk prospect theory is significantly more consistent with rankings and choices than expected utility. This conclusion no longer holds when we use prospect theory utilities and expected utilities to predict intertemporal decisions. The latter finding cautions against the common assumption in health economics that health state utilities are transferable across decision contexts. Our results suggest that the standard gamble and algorithms based on, should not be used to value health.