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Updated: Jul 2, 2026

Inverse Probability of Treatment Weighting (Propensity Score) using the Military Health System Data Repository and National Death Index
06:55

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Published on: January 8, 2020

Rabin's paradox for health outcomes.

Stefan A Lipman1, Arthur E Attema1

  • 1Erasmus School of Health Policy and Management, Erasmus University Rotterdam, Rotterdam, The Netherlands.

Health Economics
|June 21, 2019
PubMed
Summary
This summary is machine-generated.

This study directly tested Rabin's paradox (RP) in health economics, finding that expected utility maximization assumptions lead to unrealistic risk aversion. Alternative models like prospect theory better explain individual preferences and health economic decisions.

Keywords:
Rabin's paradoxexpected utilityloss aversionreference dependencerisk aversion

Related Experiment Videos

Last Updated: Jul 2, 2026

Inverse Probability of Treatment Weighting (Propensity Score) using the Military Health System Data Repository and National Death Index
06:55

Inverse Probability of Treatment Weighting (Propensity Score) using the Military Health System Data Repository and National Death Index

Published on: January 8, 2020

Area of Science:

  • Health Economics
  • Behavioral Economics
  • Decision Theory

Background:

  • Health economic models often assume expected utility maximization with concave utility functions for risk aversion.
  • Rabin's paradox (RP) highlights potential inconsistencies in expected utility theory, suggesting extreme risk aversion when evaluating mixed gambles.
  • Previous research on RP has been largely theoretical, with limited empirical testing within individual preferences, especially in the health domain.

Purpose of the Study:

  • To empirically test Rabin's paradox (RP) within the health domain.
  • To investigate the implications of RP for health economic modeling and decision-making.
  • To evaluate the suitability of alternative models, such as prospect theory, in explaining health-related preferences.

Main Methods:

  • Direct experimental testing of Rabin's paradox preferences in the health context.
  • Analysis of individual decision-making when faced with mixed gambles involving health outcomes.
  • Comparison of empirical findings with predictions from expected utility theory and prospect theory.

Main Results:

  • The study provides direct empirical evidence of Rabin's paradox in individual health preferences.
  • Observed preferences in the health domain are inconsistent with the assumptions of expected utility maximization, implying excessive risk aversion.
  • Findings support the need for alternative behavioral models in health economics.

Conclusions:

  • Expected utility maximization is insufficient to capture realistic risk preferences in health economics.
  • Prospect theory, incorporating reference-dependence and loss aversion, offers a more empirically valid framework for health economic decisions.
  • The study advocates for a shift towards empirically grounded models in health economic research and policy.