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Abstract

This paper investigates preferences for different health profiles, especially sequences of increasing and decreasing pain. We test conflicting predictions in terms of preferences over two painful sequences. The QALY concept relevant for the determination of different levels of health-related quality of life implies indifference, whereas behavioral theories find preferences related to ordering, following the peak-end-rule. Using an experimental design with real consequences we generate decisions about painful sequences induced by the cold pressor test. The results are compared with hypothetical choice data elicited using standard methods. We find that hypothetical methods reveal decisions in line with the peak-end-rule. However when it comes to real consequences of their decisions, subjects are on average not willing to pay for that preference.

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File URL: http://www.fww.ovgu.de/fww_media/femm/femm_2012/2012_12.pdf
File Function: First version, 2011
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Bibliographic Info

Paper provided by Otto-von-Guericke University Magdeburg, Faculty of Economics and Management in its series FEMM Working Papers with number 120012.

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Length: 16 pages
Date of creation: Jun 2012
Date of revision:
Handle: RePEc:mag:wpaper:120012

Contact details of provider:
Postal: Universitätsplatz 2, Gebäude W und I, 39106 Magdeburg
Phone: (0391) 67-18 584
Fax: (0391) 67-12 120
Web page: http://www.ww.uni-magdeburg.de
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Related research

Keywords: pain; peak-end-rule; willingness-to-pay;

Find related papers by JEL classification:

• D8 - Microeconomics - - Information, Knowledge, and Uncertainty
• C9 - Mathematical and Quantitative Methods - - Design of Experiments

This paper has been announced in the following NEP Reports:

• NEP-ALL-2012-07-23 (All new papers)
• NEP-CBE-2012-07-23 (Cognitive & Behavioural Economics)
• NEP-EVO-2012-07-23 (Evolutionary Economics)
• NEP-EXP-2012-07-23 (Experimental Economics)
• NEP-HEA-2012-07-23 (Health Economics)

References

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1. Camerer, Colin F & Hogarth, Robin M, 1999. "The Effects of Financial Incentives in Experiments: A Review and Capital-Labor-Production Framework," Journal of Risk and Uncertainty, Springer, vol. 19(1-3), pages 7-42, December.
   
   • Camerer, Colin F. & Hogarth, Robin M., 1999. "The Effects of Financial Incentives in Experiments: A Review and Capital-Labor-Production Framework," Working Papers 1059, California Institute of Technology, Division of the Humanities and Social Sciences.
2. Loewenstein, George F & Sicherman, Nachum, 1991. "Do Workers Prefer Increasing Wage Profiles?," Journal of Labor Economics, University of Chicago Press, vol. 9(1), pages 67-84, January.
3. Wilcox, Nathaniel T, 1993. "Lottery Choice: Incentives, Complexity and Decision Time," Economic Journal, Royal Economic Society, vol. 103(421), pages 1397-1417, November.
4. Richard H. Thaler & Eric J. Johnson, 1990. "Gambling with the House Money and Trying to Break Even: The Effects of Prior Outcomes on Risky Choice," Management Science, INFORMS, vol. 36(6), pages 643-660, June.
5. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
6. James Murphy & P. Allen & Thomas Stevens & Darryl Weatherhead, 2005. "A Meta-analysis of Hypothetical Bias in Stated Preference Valuation," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 30(3), pages 313-325, 03.
7. Lowenstein, George & Prelec, Drazen, 1991. "Negative Time Preference," American Economic Review, American Economic Association, vol. 81(2), pages 347-52, May.
8. Blumenschein, Karen & Johannesson, Magnus & Yokoyama, Krista K. & Freeman, Patricia R., 2001. "Hypothetical versus real willingness to pay in the health care sector: results from a field experiment," Journal of Health Economics, Elsevier, vol. 20(3), pages 441-457, May.
9. 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.

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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:

1. Weekly Roundup 181: A Curated Linkfest For The Smartest People On The Web!
   by Miguel in Simoleon Sense on 2012-07-29 16:45:36
2. How do you want your pain?
   by Economic Logician in Economic Logic on 2012-08-02 13:23:00

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