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A consistency test of the time trade-off

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  • Bleichrodt, Han
  • Pinto, Jose Luis
  • Maria Abellan-Perpinan, Jose

Abstract

This paper tests the internal consistency of time trade-off utilities. We find significant violations of consistency in the direction predicted by loss aversion. The violations disappear for higher gauge durations. We show that loss aversion can also explain that for short gauge durations time trade-off utilities exceed standard gamble utilities. Our results suggest that time trade-off measurements that use relatively short gauge durations, like the widely used EuroQol algorithm (Dolan 1997), are affected by loss aversion and lead to utilities that are too high.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Health Economics.

Volume (Year): 22 (2003)
Issue (Month): 6 (November)
Pages: 1037-1052

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Handle: RePEc:eee:jhecon:v:22:y:2003:i:6:p:1037-1052

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Web page: http://www.elsevier.com/locate/inca/505560

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References

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  1. Bostic, Raphael & Herrnstein, R. J. & Luce, R. Duncan, 1990. "The effect on the preference-reversal phenomenon of using choice indifferences," Journal of Economic Behavior & Organization, Elsevier, vol. 13(2), pages 193-212, March.
  2. Ortona, Guido & Scacciati, Francesco, 1992. "New experiments on the endowment effect," Journal of Economic Psychology, Elsevier, vol. 13(2), pages 277-296, June.
  3. Tversky, Amos & Kahneman, Daniel, 1991. "Loss Aversion in Riskless Choice: A Reference-Dependent Model," The Quarterly Journal of Economics, MIT Press, vol. 106(4), pages 1039-61, November.
  4. John C. Hershey & Paul J. H. Schoemaker, 1985. "Probability Versus Certainty Equivalence Methods in Utility Measurement: Are they Equivalent?," Management Science, INFORMS, vol. 31(10), pages 1213-1231, October.
  5. Dolan, Paul, 2000. "The measurement of health-related quality of life for use in resource allocation decisions in health care," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 32, pages 1723-1760 Elsevier.
  6. Amos Tversky & Daniel Kahneman, 1979. "Prospect Theory: An Analysis of Decision under Risk," Levine's Working Paper Archive 7656, David K. Levine.
  7. Dolan, Paul & Jones-Lee, Michael, 1997. "The time trade-off: A note on the effect of lifetime reallocation of consumption and discounting," Journal of Health Economics, Elsevier, vol. 16(6), pages 731-739, December.
  8. G. Ardine De Wit & Jan J.V. Busschbach & Frank Th. De Charro, 2000. "Sensitivity and perspective in the valuation of health status: whose values count?," Health Economics, John Wiley & Sons, Ltd., vol. 9(2), pages 109-126.
  9. Dolan, P. & Gudex, C. & Kind, P. & Williams, A., 1996. "Valuing health states: A comparison of methods," Journal of Health Economics, Elsevier, vol. 15(2), pages 209-231, April.
  10. Dolan, Paul & Stalmeier, Peep, 2003. "The validity of time trade-off values in calculating QALYs: constant proportional time trade-off versus the proportional heuristic," Journal of Health Economics, Elsevier, vol. 22(3), pages 445-458, May.
  11. Hall, Jane & Gerard, Karen & Salkeld, Glenn & Richardson, Jeff, 1992. "A cost utility analysis of mammography screening in Australia," Social Science & Medicine, Elsevier, vol. 34(9), pages 993-1004, May.
  12. Bleichrodt, Han & Johannesson, Magnus, 1997. "Standard gamble, time trade-off and rating scale: Experimental results on the ranking properties of QALYs," Journal of Health Economics, Elsevier, vol. 16(2), pages 155-175, April.
  13. Anne Spencer, 2003. "The TTO method and procedural invariance," Health Economics, John Wiley & Sons, Ltd., vol. 12(8), pages 655-668.
  14. Richardson, J., 1994. "Cost utility analysis: What should be measured?," Social Science & Medicine, Elsevier, vol. 39(1), pages 7-21, July.
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Citations

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Cited by:
  1. Arthur E. Attema & Werner B.F. Brouwer & Olivier l'Haridon, 2013. "A quantification of prospect theory in the health domain," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201321, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
  2. José Mª Abellán & José Luis Pinto & Ildefonso Méndez & Xabier Badía, 2004. "A test of the predictive validity of non-linear QALY models using time trade-off utilities," Economics Working Papers 741, Department of Economics and Business, Universitat Pompeu Fabra.
  3. Attema, Arthur E. & Brouwer, Werner B.F. & l’Haridon, Olivier, 2013. "Prospect theory in the health domain: A quantitative assessment," Journal of Health Economics, Elsevier, vol. 32(6), pages 1057-1065.
  4. Buckingham, K. & Devlin, N. & Tabberer, M., 2004. "A theoretical framework for TTO valuations and a taxonomy of TTO approaches: results from a pilot study," Working Papers 04/07, Department of Economics, City University London.
  5. Ken Buckingham & Nancy Devlin, 2006. "A theoretical framework for TTO valuations of health," Health Economics, John Wiley & Sons, Ltd., vol. 15(10), pages 1149-1154.
  6. Attema, Arthur E. & Brouwer, Werner B.F., 2012. "A test of independence of discounting from quality of life," Journal of Health Economics, Elsevier, vol. 31(1), pages 22-34.
  7. Arthur Attema & Werner Brouwer, 2012. "The way that you do it? An elaborate test of procedural invariance of TTO, using a choice-based design," The European Journal of Health Economics, Springer, vol. 13(4), pages 491-500, August.
  8. Diego Ossa & Andrew Briggs & Emma McIntosh & Warren Cowell & Tim Littlewood & Mark Sculpher, 2007. "Recombinant Erythropoietin for Chemotherapy-Related Anaemia," PharmacoEconomics, Springer, vol. 25(3), pages 223-237, March.
  9. Attema, Arthur & Brouwer, Werner, 2012. "In search of a preferred preference elicitation method: A test of the internal consistency of choice and matching tasks," MPRA Paper 36100, University Library of Munich, Germany.
  10. Rosalie Viney & Elizabeth Savage, 2006. "Health care policy evaluation: empirical analysis of the restrictions implied by Quality Adjusted Life Years, CHERE Working Paper 2006/10," Working Papers 2006/10, CHERE, University of Technology, Sydney.
  11. Attema, Arthur E. & Brouwer, Werner B.F., 2009. "The correction of TTO-scores for utility curvature using a risk-free utility elicitation method," Journal of Health Economics, Elsevier, vol. 28(1), pages 234-243, January.
  12. José-Mar�a Abellán-Perpi�án & José-Luis Pinto-Prades & Ildefonso Méndez-Mart�nez & Xabier Bad�a-Llach, 2006. "Towards a better QALY model," Health Economics, John Wiley & Sons, Ltd., vol. 15(7), pages 665-676.
  13. Keith Tolley & Catherine Goad & Yunni Yi & Penny Maroudas & Amin Haiderali & Gwilym Thompson, 2013. "Utility elicitation study in the UK general public for late-stage chronic lymphocytic leukaemia," The European Journal of Health Economics, Springer, vol. 14(5), pages 749-759, October.
  14. Benjamin M. Craig, 2009. "The duration effect: a link between TTO and VAS values," Health Economics, John Wiley & Sons, Ltd., vol. 18(2), pages 217-225.
  15. Arthur E. Attema & Werner B. F. Brouwer, 2008. "Can we fix it? Yes we can! But what? A new test of procedural invariance in TTO-measurement," Health Economics, John Wiley & Sons, Ltd., vol. 17(7), pages 877-885.
  16. Arthur Attema & Yvette Edelaar-Peeters & Matthijs Versteegh & Elly Stolk, 2013. "Time trade-off: one methodology, different methods," The European Journal of Health Economics, Springer, vol. 14(1), pages 53-64, July.

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