A Reference Lottery Metric for Valuing Health

This study utilizes reference lotteries on life and death to establish a death-equivalent metric for valuing long-term health effects. We use a computer-based survey approach to elicit choices among residential locations that pose different risks of chronic disease and dying in an automobile acciden...

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Bibliographic Details
Published in:Management science 1996-08, Vol.42 (8), p.1118-1130
Main Authors: Magat, Wesley A, Viscusi, W. Kip, Huber, Joel
Format: Article
Language:English
Subjects:
Applied sciences
Automobiles
benefit valuation
Cancer
Chronic illnesses
Death
Decision analysis
Decision theory. Utility theory
Disease
Disease risk
Exact sciences and technology
Financial risk
Health
Health economics
Health risk assessment
Health risks
Lotteries
Lymph
Lymphoma
Management
Nerves
Nervous system diseases
Operational research and scientific management
Operational research. Management science
Peripheral neuropathy
Personal computers
Questionnaires
Risk
Studies
utility
Utility functions
Values
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Summary:This study utilizes reference lotteries on life and death to establish a death-equivalent metric for valuing long-term health effects. We use a computer-based survey approach to elicit choices among residential locations that pose different risks of chronic disease and dying in an automobile accident. From paired choices between different locations, we infer their rates of trade-off between reducing the risks of chronic diseases and the automobile death risk. The values of reducing the risks from two diseases, a nerve disease (peripheral neuropathy) and lymphoma (cancer of the lymph system), are measured in terms of both trade-off rates with the risk of an automobile death and with dollars. While the use of reference lotteries for monetary outcomes to establish a utility metric is well established for monetary outcomes, our results suggest that reference lotteries on life and death can also be applied with decision-makers facing realistic choices to construct a utility metric for valuing health status. The results were corroborated by a strong positive correlation between the risk-risk trade-off values and relative aversion scores for the different health outcomes, as well as by the relative values of avoiding the three diseases in our study.
ISSN:0025-1909
1526-5501
DOI:10.1287/mnsc.42.8.1118