Risk Attitude and Time Preference in Health

Risk attitude and time preference are well-known and distinct concepts in the study of individuals' preferences for goods such as money. This paper reviews and explores the application of these concepts to the field of health. A mathematical model is presented, both in a general form and in an exponential form, which relates an individual's risk attitude in health to three effects-a quantity effect, a gambling effect and a time preference effect. It is shown that the overall risk attitude, as measured by its direction and magnitude, is merely the sum of the individual effects, as measured by their directions and magnitudes. Measurement methods are presented which can be used in a given situation to determine which effects are operating, in what directions and with what magnitudes. A new measurement procedure based on the temporary palliation of a chronic condition is described as a method of obtaining an individual's time preference pattern for health.

[1]  K. Arrow.  Essays in the theory of risk-bearing , 1958 .

[2]  George W. Torrance,et al.  Health Status Index Models: A Unified Mathematical View , 1976 .

[3]  V. Fuchs,et al.  Risk Attitudes in Health: An Exploratory Study , 1982 .

[4]  Ralph L. Keeney,et al.  Feature Article - Decision Analysis: An Overview , 1982, Oper. Res..

[5]  David E. Bell,et al.  Regret in Decision Making under Uncertainty , 1982, Oper. Res..

[6]  H. Sox,et al.  Assessment of Patients' Preferences for Therapeutic Outcomes , 1981, Medical decision making : an international journal of the Society for Medical Decision Making.

[7]  G. Torrance,et al.  The utility of different health states as perceived by the general public. , 1978, Journal of chronic diseases.

[8]  B. McNeil,et al.  Fallacy of the five-year survival in lung cancer. , 1978, The New England journal of medicine.

[9]  A. Tversky,et al.  On the elicitation of preferences for alternative therapies. , 1982, The New England journal of medicine.

[10]  J. Pratt.  RISK AVERSION IN THE SMALL AND IN THE LARGE11This research was supported by the National Science Foundation (grant NSF-G24035). Reproduction in whole or in part is permitted for any purpose of the United States Government. , 1964 .

[11]  M S Thompson,et al.  First principles of cost-effectiveness analysis in health. , 1979, Public health reports.

[12]  Mancur Olson,et al.  Positive Time Preference , 1981, Journal of Political Economy.

[13]  S. Richard.  Multivariate Risk Aversion, Utility Independence and Separable Utility Functions , 1975 .

[14]  R M Kaplan,et al.  Health Status Index: Category Rating versus Magnitude Estimation for Measuring Levels of Well-Being , 1979, Medical care.

[15]  Rakesh Kumar Sarin,et al.  Strength of Preference and Risky Choice , 1982, Oper. Res..

[16]  R. L. Keeney,et al.  Decisions with Multiple Objectives: Preferences and Value Trade-Offs , 1977, IEEE Transactions on Systems, Man, and Cybernetics.

[17]  Joseph S. Pliskin,et al.  Utility Functions for Life Years and Health Status , 1980, Oper. Res..

[18]  M. Weinstein,et al.  Foundations of cost-effectiveness analysis for health and medical practices. , 1977, The New England journal of medicine.

[19]  A. Tversky,et al.  The Psychology of Preferences , 1982 .

[20]  H. Kunreuther,et al.  Decision Making: SOURCES OF BIAS IN ASSESSMENT PROCEDURES FOR UTILITY FUNCTIONS , 1982 .

[21]  Charles M. Harvey,et al.  Conditions on Risk Attitude for a Single Attribute , 1981 .

[22]  Torrance Gw,et al.  Toward a utility theory foundation for health status index models. , 1976 .

[23]  Time Preference and Health: An Exploratory Study , 1980 .

[24]  George W. Torrance,et al.  Application of Multi-Attribute Utility Theory to Measure Social Preferences for Health States , 1982, Oper. Res..