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Related Experiment Videos

Health values and prospect theory: a comment.

D Stratmann-Schoene1, T Klose

  • 1Department of Health Economics, University of Ulm, Germany.

Medical Decision Making : an International Journal of the Society for Medical Decision Making
|February 24, 2001
PubMed
Summary

Community members may not always underestimate health improvements compared to patients under prospect theory. The reference point for health valuations in prospect theory may not be the current health state.

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Area of Science:

  • Health economics
  • Behavioral economics
  • Decision theory

Background:

  • Prospect theory is a behavioral economic theory that describes how people choose between probabilistic alternatives involving risk.
  • Treadwell and Lenert (2023) posited that community members, unlike patients, tend to undervalue health gains within the prospect theory framework.
  • This assertion was made in a recent publication in Medical Decision Making.

Discussion:

  • This commentary challenges the universality of Treadwell and Lenert's claim regarding health improvement valuation.
  • The authors demonstrate that the underestimation of health gains by community members is contingent upon specific preference functions.
  • Arguments are presented against using the current health state as the default reference point in prospect theory applications to health.

Key Insights:

  • The relationship between prospect theory, health valuations, and reference points is more nuanced than previously suggested.
  • Preference functions significantly influence how individuals, including community members and patients, perceive the utility of health improvements.
  • The choice of an appropriate reference level is critical for accurate application of prospect theory in health economics.

Outlook:

  • Further research is needed to explore the diverse preference functions and their impact on health valuation.
  • Investigating alternative reference points beyond the current health state could refine prospect theory models in healthcare.
  • Understanding these nuances is vital for developing effective health policies and interventions.

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