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Deriving welfare measures from discrete choice experiments: a response to Ryan and Santos Silva

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  • Emily Lancsar
  • Elizabeth Savage

Abstract

In this response we start by highlighting the key area of agreement between the commentaries and our original paper: if there is uncertainty regarding which alternative will be chosen, in a DCE or in the real world, then the compensating variation as modified for discrete data by Small and Rosen is the appropriate method of deriving welfare measures from DCEs. Both commentators point out circumstances in which the method traditionally used in the health economics arena may be consistent with the compensating variation. We show that these circumstances require a number of potentially unrealistic and ad hoc assumptions, and argue that using the traditional method could produce erroneous welfare estimates if these assumptions fail to hold in practice. We show that the compensating variation method can accommodate each of the special cases raised by the commentators and therefore is the more general and appropriate approach to deriving welfare measures from DCEs. We also respond to issues raised regarding the estimation of DCEs in general and our application to asthma medication in particular. Copyright © 2004 John Wiley & Sons, Ltd.

Suggested Citation

  • Emily Lancsar & Elizabeth Savage, 2004. "Deriving welfare measures from discrete choice experiments: a response to Ryan and Santos Silva," Health Economics, John Wiley & Sons, Ltd., vol. 13(9), pages 919-924, September.
  • Handle: RePEc:wly:hlthec:v:13:y:2004:i:9:p:919-924
    DOI: 10.1002/hec.885
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    References listed on IDEAS

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    1. Small, Kenneth A & Rosen, Harvey S, 1981. "Applied Welfare Economics with Discrete Choice Models," Econometrica, Econometric Society, vol. 49(1), pages 105-130, January.
    2. Louviere,Jordan J. & Hensher,David A. & Swait,Joffre D. With contributions by-Name:Adamowicz,Wiktor, 2000. "Stated Choice Methods," Cambridge Books, Cambridge University Press, number 9780521788304, October.
    3. Emily Lancsar & Cam Donaldson, 2005. "Discrete choice experiments in health economics: Distinguishing between the method and its application," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 6(4), pages 314-316, December.
    4. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521747387, October.
    5. Emily Lancsar, 2002. "Deriving welfare measures from stated preference discrete choice modelling experiments, CHERE Discussion Paper No 48," Discussion Papers 48, CHERE, University of Technology, Sydney.
    6. Jane Hall & Patricia Kenny & Madeleine King & Jordan Louviere & Rosalie Viney & Angela Yeoh, 2002. "Using stated preference discrete choice modelling to evaluate the introduction of varicella vaccination," Health Economics, John Wiley & Sons, Ltd., vol. 11(5), pages 457-465, July.
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    Cited by:

    1. Richard Norman & Gisselle Gallego, 2008. "Equity weights for economic evaluation: An Australian Discrete Choice Experiment, CHERE Working Paper 2008/5," Working Papers 2008/5, CHERE, University of Technology, Sydney.
    2. Grisolía, José M. & Longo, Alberto & Boeri, Marco & Hutchinson, George & Kee, Frank, 2013. "Trading off dietary choices, physical exercise and cardiovascular disease risks," Social Science & Medicine, Elsevier, vol. 93(C), pages 130-138.
    3. Bonny Parkinson & Stephen Goodall & Richard Norman, 2013. "Measuring the Loss of Consumer Choice in Mandatory Health Programmes Using Discrete Choice Experiments," Applied Health Economics and Health Policy, Springer, vol. 11(2), pages 139-150, April.
    4. Emily Lancsar & Cam Donaldson, 2005. "Discrete choice experiments in health economics: Distinguishing between the method and its application," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 6(4), pages 314-316, December.
    5. Emma McIntosh, 2006. "Using Discrete Choice Experiments within a Cost-Benefit Analysis Framework," PharmacoEconomics, Springer, vol. 24(9), pages 855-868, September.

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