A Consistency Test of the Time Trade-Off

UPF Economics and Business Working Paper No. 676

32 Pages Posted: 20 Aug 2003

See all articles by Han Bleichrodt

Han Bleichrodt

Erasmus University Rotterdam (EUR) - Institute of Health Policy and Management

José Luis Pinto Prades

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences

José María Abellán Perpiñán

University of Murcia - Department of Applied Economics

Date Written: March 2003

Abstract

This paper tests the internal consistency of time trade-off utilities. We find significant violations of consistency in the direction predicted by loss aversion. The violations disappear for higher gauge durations. We show that loss aversion can also explain that for short gauge durations time trade-off utilities exceed standard gamble utilities. Our results suggest that time trade-off measurements that use relatively short gauge durations, like the widely used EuroQol algorithm (Dolan 1997), are affected by loss aversion and lead to utilities that are too high.

Keywords: Cost-Utility Analysis, Time Trade-Off, Loss Aversion

JEL Classification: I10

Suggested Citation

Bleichrodt, Han and Pinto Prades, José Luis and Abellán Perpiñán, José María, A Consistency Test of the Time Trade-Off (March 2003). UPF Economics and Business Working Paper No. 676, Available at SSRN: https://ssrn.com/abstract=428260 or http://dx.doi.org/10.2139/ssrn.428260

Han Bleichrodt (Contact Author)

Erasmus University Rotterdam (EUR) - Institute of Health Policy and Management ( email )

Netherlands

José Luis Pinto Prades

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain

José María Abellán Perpiñán

University of Murcia - Department of Applied Economics ( email )

3010 Murcia
Spain
+34968363736 (Phone)
+34968363745 (Fax)

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