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A Reference Lottery Metric for Valuing Health

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Author Info

  • Wesley A. Magat

    (Fuqua School of Business, Duke University, Durham, North Carolina 27708)

  • W. Kip Viscusi

    (Department of Economics, Duke University, Durham, North Carolina 27708)

  • Joel Huber

    (Fuqua School of Business, Duke University, Durham, North Carolina 27708)

Abstract

This study utilizes reference lotteries on life and death to establish a death-equivalent metric for valuing long-term health effects. We use a computer-based survey approach to elicit choices among residential locations that pose different risks of chronic disease and dying in an automobile accident. From paired choices between different locations, we infer their rates of trade-off between reducing the risks of chronic diseases and the automobile death risk. The values of reducing the risks from two diseases, a nerve disease (peripheral neuropathy) and lymphoma (cancer of the lymph system), are measured in terms of both trade-off rates with the risk of an automobile death and with dollars. While the use of reference lotteries for monetary outcomes to establish a utility metric is well established for monetary outcomes, our results suggest that reference lotteries on life and death can also be applied with decision-makers facing realistic choices to construct a utility metric for valuing health status. The results were corroborated by a strong positive correlation between the risk-risk trade-off values and relative aversion scores for the different health outcomes, as well as by the relative values of avoiding the three diseases in our study.

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File URL: http://dx.doi.org/10.1287/mnsc.42.8.1118
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Bibliographic Info

Article provided by INFORMS in its journal Management Science.

Volume (Year): 42 (1996)
Issue (Month): 8 (August)
Pages: 1118-1130

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Handle: RePEc:inm:ormnsc:v:42:y:1996:i:8:p:1118-1130

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Related research

Keywords: benefit valuation; health; utility;

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Cited by:
  1. Sujitra Vassanadumrongdee & Shunji Matsuoka, 2005. "Risk Perceptions and Value of a Statistical Life for Air Pollution and Traffic Accidents: Evidence from Bangkok, Thailand," Journal of Risk and Uncertainty, Springer, vol. 30(3), pages 261-287, May.
  2. Viscusi, W Kip & Aldy, Joseph E, 2003. " The Value of a Statistical Life: A Critical Review of Market Estimates throughout the World," Journal of Risk and Uncertainty, Springer, vol. 27(1), pages 5-76, August.
  3. Jin-Tan Liu & James K. Hammitt & Jung-Der Wang & Meng-Wen Tsou, 2003. "Valuation of the Risk of SARS in Taiwan," NBER Working Papers 10011, National Bureau of Economic Research, Inc.
  4. Hammitt, James & Roman, Henry & Stieb, David & Walsh, Tyra, 2012. "Expert Elicitation of the Value per Statistical Life in an Air Pollution Context," TSE Working Papers 12-290, Toulouse School of Economics (TSE).
  5. W. Viscusi, 2009. "Valuing risks of death from terrorism and natural disasters," Journal of Risk and Uncertainty, Springer, vol. 38(3), pages 191-213, June.
  6. Carlsson, Fredrik & Daruvala, Dinky & Jaldell, Henrik, 2008. "Value of statistical life and cause of accident: A choice experiment," Working Papers in Economics 332, University of Gothenburg, Department of Economics.
  7. Alberini, Anna & Chiabai, Aline, 2007. "Urban environmental health and sensitive populations: How much are the Italians willing to pay to reduce their risks?," Regional Science and Urban Economics, Elsevier, vol. 37(2), pages 239-258, March.
  8. Alberini, Anna & Ščasný, Milan, 2013. "Exploring heterogeneity in the value of a statistical life: Cause of death v. risk perceptions," Ecological Economics, Elsevier, vol. 94(C), pages 143-155.
  9. James Hammitt & Jin-Tan Liu, 2004. "Effects of Disease Type and Latency on the Value of Mortality Risk," Journal of Risk and Uncertainty, Springer, vol. 28(1), pages 73-95, January.
  10. Anna Alberini & Stefania Tonin & Margherita Turvani, 2009. "The Value of Reducing Cancer Risks at Contaminated Sites: Are More Heavily Exposed People Willing to Pay More?," Working Papers 2009.60, Fondazione Eni Enrico Mattei.
  11. Takahiro Tsuge & Atsuo Kishimoto & Kenji Takeuchi, 2005. "A Choice Experiment Approach to the Valuation of Mortality," Journal of Risk and Uncertainty, Springer, vol. 31(1), pages 73-95, July.
  12. George Houtven & Melonie Sullivan & Chris Dockins, 2008. "Cancer premiums and latency effects: A risk tradeoff approach for valuing reductions in fatal cancer risks," Journal of Risk and Uncertainty, Springer, vol. 36(2), pages 179-199, April.
  13. Ana M. Guerrero & Carmen Herrero Blanco, 1999. "-Time Preference And Individual Health Profiles," Working Papers. Serie AD 1999-20, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  14. James Hammitt & Kevin Haninger, 2010. "Valuing fatal risks to children and adults: Effects of disease, latency, and risk aversion," Journal of Risk and Uncertainty, Springer, vol. 40(1), pages 57-83, February.

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