Time preference, the discounted utility model and health
The constant rate discounted utility model is commonly used to represent intertemporal preferences in health care program evaluations. This paper examines the appropriateness of this model, and argues that the model fails both normatively and descriptively as a representation of individual intertemporal preferences for health outcomes. Variable rate discounted utility models are more flexible, but still require restrictive assumptions and may lead to dynamically inconsistent behaviour. The paper concludes by considering two ways of incorporating individual intertemporal preferences in health care program evaluations that allow for complementarity of health outcomes in different time periods.
|Keywords||Cost utility analysis, Decision analysis, Time preference, utility theory|
|Persistent URL||dx.doi.org/10.1016/0167-6296(95)00031-3, hdl.handle.net/1765/11028|
Bleichrodt, H., & Gafni, A.. (1996). Time preference, the discounted utility model and health. Journal of Health Economics, 15(1), 49–66. doi:10.1016/0167-6296(95)00031-3