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The influence of the ratio bias phenomenon on the elicitation of health states utilities

Author

Listed:
  • Jose-Luis Pinto-Prades
  • Jorge-Eduardo Martinez-Perez
  • Jose-Maria Abellan-Perpinan

Abstract

This paper tests whether logically equivalent risk formats can lead to different health state utilities elicited by means of the traditional standard gamble (SG) method and a modified version of the method that we call ``double lottery.'' We compare utilities for health states elicited when probabilities are framed in terms of frequencies with respect to 100 people in the population (i.e., X out of 100 who follow a medical treatment will die) with SG utilities elicited for frequencies with respect to 1,000 people in the population (i.e., Y out of 1,000 who follow a medical treatment will die). We found that people accepted a lower risk of death when success and failure probabilities were framed as frequencies type ``Y deaths out of 1,000'' rather than as frequencies type ``X deaths out of 100'' and hence the utilities for health outcomes were higher when the denominator was 1000 than when it was 100. This framing effect, known as Ratio Bias, may have important consequences in resource allocation decisions.

Suggested Citation

  • Jose-Luis Pinto-Prades & Jorge-Eduardo Martinez-Perez & Jose-Maria Abellan-Perpinan, 2006. "The influence of the ratio bias phenomenon on the elicitation of health states utilities," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 1, pages 118-133, November.
  • Handle: RePEc:jdm:journl:v:1:y:2006:i::p:118-133
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    References listed on IDEAS

    as
    1. José-Luis Pinto-Prades & José-María Abellán-Perpiñán, 2005. "Measuring the health of populations: the veil of ignorance approach," Health Economics, John Wiley & Sons, Ltd., vol. 14(1), pages 69-82.
    2. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-291, March.
    3. Bleichrodt, Han, 2001. "Probability Weighting in Choice under Risk: An Empirical Test," Journal of Risk and Uncertainty, Springer, vol. 23(2), pages 185-198, September.
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    Citations

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    Cited by:

    1. Gabriella Passerini & Laura Macchi & Maria Bagassi, 2012. "A methodological approach to ratio bias," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 7(5), pages 602-617, September.
    2. Mathieu Lefebvre & Ferdinand Vieider & Marie Villeval, 2011. "The ratio bias phenomenon: fact or artifact?," Theory and Decision, Springer, vol. 71(4), pages 615-641, October.
    3. Carissa Bonner & Ben R. Newell, 2008. "How to make a risk seem riskier: The ratio bias versus construal level theory," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 3, pages 411-416, June.
    4. repec:jdm:journl:v:13:y:2018:i:1:p:23-32 is not listed on IDEAS
    5. Kaivanto, Kim & Kroll, Eike B., 2012. "Negative recency, randomization device choice, and reduction of compound lotteries," Economics Letters, Elsevier, vol. 115(2), pages 263-267.
    6. Paul C. Price & Teri V. Matthews, 2009. "From group diffusion to ratio bias: Effects of denominator and numerator salience on intuitive risk and likelihood judgments," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 4(6), pages 436-446, October.

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