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Explorations of the Effect of Experience on Preferences: Two Health-Care Case Studies

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  • Neuman, Einat

    ()
    (Tel Aviv University)

  • Neuman, Shoshana

    ()
    (Bar-Ilan University)

Abstract

The standard assumption in economic theory is that preferences are stable. In particular, they are not changed as a result of experience with the good/service/event. Behavioral scientists have challenged this assumption and claimed (providing evidence) that preferences are constantly changing when experience is accumulated. This paper tests the effect of experience on preferences for attributes of health-care events. We are using two very different samples and a methodology that facilitates the estimation of marginal utilities of various attributes of a composite non-traded health-care service. Discrete Choice Experimental design is employed for the analysis of samples of (1) women who gave birth, and (2) women who were diagnosed with breast cancer. For each group we had information on experience. In the case of women who gave birth, the sample was decomposed into 3 sub-samples: pregnant women with their first child (no experience); women after one delivery (single experience); and mothers after more than one delivery (multiple experience). Preferences of the 3 sub-groups have then been compared. The breast cancer patients reported the number of chemotherapy/radiation treatments they have already received, thus enabling the construction of an experience variable and testing for the effect of experience on preferences. The basic finding is that preferences for health-care attributes are significantly changed as a result of experience with the health event. However, the amount of experience is irrelevant.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2028.

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Length: 30 pages
Date of creation: Mar 2006
Date of revision:
Handle: RePEc:iza:izadps:dp2028

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Keywords: preferences; health-care; experience; Discrete Choice Experiment; delivery; breast cancer;

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  1. Grossman, Michael, 1982. "Government and Health Outcomes," American Economic Review, American Economic Association, vol. 72(2), pages 191-95, May.
  2. Rabin, Matthew, 1997. "Psychology and Economics," Department of Economics, Working Paper Series qt8jd5z5j2, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  3. G. Salkeld & M. Ryan & L. Short, 2000. "The veil of experience: do consumers prefer what they know best?," Health Economics, John Wiley & Sons, Ltd., vol. 9(3), pages 267-270.
  4. Michael Grossman, 1976. "The Correlation between Health and Schooling," NBER Chapters, in: Household Production and Consumption, pages 147-224 National Bureau of Economic Research, Inc.
  5. Kahneman, Daniel & Wakker, Peter P & Sarin, Rakesh, 1997. "Back to Bentham? Explorations of Experienced Utility," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 375-405, May.
  6. Grossman, Michael, 1972. "On the Concept of Health Capital and the Demand for Health," Journal of Political Economy, University of Chicago Press, vol. 80(2), pages 223-55, March-Apr.
  7. Constantinides, George M, 1990. "Habit Formation: A Resolution of the Equity Premium Puzzle," Journal of Political Economy, University of Chicago Press, vol. 98(3), pages 519-43, June.
  8. San Miguel, Fernando & Ryan, Mandy & Scott, Anthony, 2002. "Are preferences stable? The case of health care," Journal of Economic Behavior & Organization, Elsevier, vol. 48(1), pages 1-14, May.
  9. Tversky, Amos & Kahneman, Daniel, 1986. "Rational Choice and the Framing of Decisions," The Journal of Business, University of Chicago Press, vol. 59(4), pages S251-78, October.
  10. Pollak, Robert A., 1976. "Habit formation and long-run utility functions," Journal of Economic Theory, Elsevier, vol. 13(2), pages 272-297, October.
  11. Mandy Ryan & Cristina Ubach, 2003. "Testing for an experience endowment effect in health care," Applied Economics Letters, Taylor & Francis Journals, vol. 10(7), pages 407-410.
  12. Victor R. Fuchs, 1978. "The Supply of Surgeons and the Demand for Operations," NBER Working Papers 0236, National Bureau of Economic Research, Inc.
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Cited by:
  1. Alessandro Mengoni & Chiara Seghieri & Sabina Nuti, 2013. "The application of discrete choice experiments in health economics: a systematic review of the literature," Working Papers 201301, Scuola Superiore Sant'Anna of Pisa, Istituto di Management.

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