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The value of disease prevention vs treatment

Author

Listed:
  • Christoph M Rheinberger

    (ECHA - European Chemicals Agency)

  • Daniel Herrera-Araujo

    (PSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • James K. Hammitt

    (Harvard University, TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique)

Abstract

We present an integrated valuation model for diseases that are life-threatening. The model extends the standard one-period value-per-statistical-life model to three health prospects: healthy, ill, and dead. We derive willingness-to-pay values for prevention efforts that reduce a disease's incidence rate as well as for treatments that lower the corresponding health deterioration and mortality rates. We find that the demand value of prevention always exceeds that of treatment. People often overweight small risks and underweight large ones. We use the rank dependent utility framework to explore how the demand for prevention and treatment alters when people evaluate probabilities in a non-linear manner. For incidence and mortality rates associated with common types of cancers, the inverseS shaped probability weighting found in experimental studies leads to a significant increase in the demand values of both treatment and prevention.

Suggested Citation

  • Christoph M Rheinberger & Daniel Herrera-Araujo & James K. Hammitt, 2016. "The value of disease prevention vs treatment," PSE-Ecole d'économie de Paris (Postprint) halshs-01626801, HAL.
    • Handle: RePEc:hal:pseptp:halshs-01626801
    DOI: 10.1016/j.jhealeco.2016.08.005
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    Citations

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    Cited by:

    1. Herrera-Araujo, Daniel & Rochaix, Lise, 2020. "Does the Value per Statistical Life vary with age or baseline health? Evidence from a compensating wage study in France," Journal of Environmental Economics and Management, Elsevier, vol. 103(C).
    2. Alberini, Anna & Ščasný, Milan, 2018. "The benefits of avoiding cancer (or dying from cancer): Evidence from a four- country study," Journal of Health Economics, Elsevier, vol. 57(C), pages 249-262.
    3. Hammitt, James K. & Treich, Nicolas, 2021. "Fatality Risk Regulation," TSE Working Papers 21-1177, Toulouse School of Economics (TSE).
    4. David Crainich & Louis Eeckhoudt & Mario Menegatti, 2019. "Vaccination as a trade-off between risks," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 5(3), pages 455-472, October.
    5. Hammitt, James K., 2022. "Prevention, treatment, and palliative care: The relative value of health improvements under alternative evaluation frameworks," Journal of Health Economics, Elsevier, vol. 84(C).
    6. Daniel Bauer & Darius Lakdawalla & Julian Reif, 2018. "Mortality Risk, Insurance, and the Value of Life," NBER Working Papers 25055, National Bureau of Economic Research, Inc.
    7. Anna Alberini & Milan Ščasný, 2021. "On the validity of the estimates of the VSL from contingent valuation: Evidence from the Czech Republic," Journal of Risk and Uncertainty, Springer, vol. 62(1), pages 55-87, February.
    8. Caroline Orset, 2017. "People's preferences for epidemic prevention measures," Working Papers 2017/01, INRA, Economie Publique.
    9. Sara Olofsson & Ulf G. Gerdtham & Lars Hultkrantz & Ulf Persson, 2019. "Dread and Risk Elimination Premium for the Value of a Statistical Life," Risk Analysis, John Wiley & Sons, vol. 39(11), pages 2391-2407, November.
    10. Herrera-Araujo, Daniel & Rheinberger, Christoph M. & Hammitt, James K., 2022. "Valuing non-marginal changes in mortality and morbidity risk," Journal of Health Economics, Elsevier, vol. 84(C).
    11. Caroline Orset, 2017. "Effectiveness of confinement to home during an influenza pandemic: evidence from the French case," Working Papers hal-01500902, HAL.
    12. Herrera-Araujo, Daniel & Hammitt, James K. & Rheinberger, Christoph M., 2020. "Theoretical bounds on the value of improved health," Journal of Health Economics, Elsevier, vol. 72(C).

    More about this item

    Keywords

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    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • I10 - Health, Education, and Welfare - - Health - - - General

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