Health shock and preference instability: assessing health-state dependency of willingness-to-pay for corrective...

Differences in contingent valuation (CV) estimates for identical healthcare goods can cast considerable doubt on the true economic measures of consumer preferences. Hypothetical nature of CV methods can potentially depend on the salience, context and perceived relevance of the good or service under consideration. Thus, the high demand elasticity for healthcare goods warrants careful selection of study population as the contexts of valuation significantly changes after experiencing health shock.

In this study, using triple-bounded dichotomous choice (TBDC) experiments, we test how negative health shock (namely, being diagnosed with refractive errors), can alter preference over a common health good (namely, corrective eyeglasses). We compared elicited WTP of diagnosed patients with a synthetically constructed comparable cohort without the same health shock, controlling for the possible self-selection using a number of matching techniques based on the observable socio-demographic characteristics.

The consumers diagnosed with vision problems exhibit a rightward shift in their demand curve compared to observationally identical consumers without such problems resulting in about 17% higher consumer surplus. The consumers without the health shock are willing to pay about BDT 762.4 [95% CI: BDT 709.9 - BDT 814.9] for corrective eyeglasses, which gets 15-30% higher for the matched with-health-shock consumers. Multivariable analyses suggest more educated and wealthier individuals are willing to pay respectively BDT 208 and BDT 119 more for corrective eyeglasses. We have tested the models for different matching protocols. Our results are fairly robust to alternate specifications and various matching techniques.

The preferences for healthcare goods, such as eyeglasses, can significantly depend upon the respondent being diagnosed with refractive errors. Our findings have implications for general cost-benefit analyses often relying on WTP, which can vary depending on the contexts. There are also increasing interests in cost recovery models, which require understanding the demand for healthcare goods and services. We find eliciting the demand needs to consider the health status of the population from which the respondents are sampled.